Woodside’s announcement that it was ending talks on a merger with Santos led to a nearly 9 percent drop in Santos shares. The two rival energy producers reportedly could not agree on a valuation, resulting in the conclusion of the merger talks. This announcement had a significant impact on the market, with Santos shares plummeting nearly 9 percent while Woodside’s shares actually rose by 1 percent.
Had the merger gone through, it would have created a global business worth over $80 billion, making it the fourth-largest listed LNG producer globally, following Shell, ExxonMobil, and Chevron. This would have given the new entity an approximate 19 percent market share of Australia’s total gas output. Woodside, being more than twice the size of Santos in terms of market value and revenue, did not make a bid for Santos’ shares after conducting nearly two months of due diligence and negotiations.
When asked about the decision, Woodside’s chief executive Meg O’Neill stated that the company conducts thorough due diligence with every opportunity presented and will only pursue transactions that add value for shareholders. The decision to walk away was supported by some institutional shareholders who opposed the deal, including Allan Gray, a fund holding approximately $700 million of Woodside stock.
Santos, Australia’s second-largest LNG producer after Woodside, is set to continue its review into ways to unlock value for shareholders after the merger talks fell through. There has been speculation that the company might try to sell all or part of its 51 percent share of the Pikka oil project in Alaska to free up cash for new projects and reduce exposure to assets of questionable value. The Australian Centre for Corporate Responsibility declared the merger “dead,” suggesting that it was time for a “new vision” for the two companies.