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Highlights

  • Santos enters exclusivity agreement with XRG Consortium for proposed USD 5.76/share acquisition.

  • Consortium granted six-week exclusive due diligence access to progress potential binding deal.

  • Analysts view the offer as compelling but see a competing bid as unlikely.

Shares of Santos Ltd (ASX:STO) rose 1% on Monday morning to trade at AUD 7.74 after the company announced progress in a potential acquisition by the XRG Consortium. The energy producer confirmed it has entered into a process and exclusivity deed relating to a non-binding indicative proposal from the consortium.

The proposal, which values Santos at USD 5.76 (AUD 8.89) per share in cash, marks the latest development in the company's ongoing strategic discussions. Under the newly signed process deed, the XRG Consortium has been granted exclusive due diligence access for a period of six weeks, commencing from Friday.

The arrangement sets out the framework for the consortium to conduct its due diligence and negotiate a potential scheme implementation deed (SID). If executed, the SID would formalise the acquisition of Santos.

As part of the exclusivity terms, Santos has agreed to a customary no shop, no talk, and no due diligence regime, meaning it cannot solicit or engage with other proposals during the exclusivity window. However, a fiduciary exception will apply after four weeks, allowing the board to assess and engage with potentially superior offers from alternative bidders if they emerge.

The XRG Consortium has also entered into a confidentiality agreement as part of the process.

Santos has advised shareholders that they do not need to take any action at this stage. The company cautioned that the deal remains non-binding and there is no guarantee a binding agreement will be reached or that the transaction will proceed.

The company reiterated its commitment to keeping the market informed under its continuous disclosure obligations.

The latest development is viewed by the market as a constructive move in the proposed acquisition, which has been closely watched in recent months. Investor sentiment was reflected in the early trading session, where Santos shares outperformed the broader market.

Macquarie analysts recently weighed in on the offer, describing it as a “final non-binding indicative offer.” The investment bank noted that the proposal follows two earlier, confidential bids made in March at USD 5.04 and USD 5.42 per share. Macquarie’s analysis suggests the current proposal implies an oil price of USD 69.25 per barrel—well above its long-term forecast of USD 65 per barrel and the implied valuation of USD 59.40 per barrel based on Santos’ prior trading levels.

While Macquarie believes the likelihood of a competing bid is low, given Santos has been considered a potential acquisition target for some time, it does not entirely rule out interest from other private equity groups or national oil companies.