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Shares in Santos Ltd (ASX:STO) have jumped as much as +15% in early trades on Monday, per Cboe live pricing data, after UAE-owned ADNOC launched a takeover offer at the company.
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Valued at around A$30 billion, the deal reflects an AUD share price offer of $8.89/sh for Santos. In the first half hour of Monday trade, shares jumped to $8.00/sh – suggesting much of the market was happy with the deal.
Not all HotCopper users agreed, with some suggesting the offer was too cheap, especially given recent oil price action in the Middle East. While this finance journalist suspects much of the current volatility will soon recede – just consider that the ASX opened green on Monday – it was a sentiment not without support.
That the price has hit $8/sh on Monday morning brings Santos shares back to where they were around a year ago, with 1Y returns now showing +7% – maybe a number with not enough sex appeal for some, but better at least than Woodside’s -2.3% returns to shareholders over more or less the same period.
So why does a UAE oil multinational want to buy Santos in the first place? That answer is probably obvious – more exposure to Asian markets and an expanded international footprint in general.
There’s one big question overshadowing this deal, though – whether Australia’s notorious Foreign Investments Review Board (FIRB) will even allow the deal to go through.
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Clearly ADNOC is confident that it can purchase the Aussie energy major, but in the current geopolitical climate, the appetite for this deal’s conclusion remains questionable.
At least one forums user invoked a line from The Castle – “Tell ’em to get stuffed.”
STO last traded at $7.99/sh.
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