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Santos and Woodside have ended their merger talks that would have resulted in the creation of a $52-billion energy major with solid exposure to the LNG space.
The development was not unexpected, especially since some investors voiced concern that Woodside would need to pay a substantial premium for Santos to make the deal worthwhile for the company, per the Financial Times.
"We continue to be disciplined in our approach to mergers and acquisitions and capital management to create and deliver value for shareholders," Woodside chief executive Meg O’Neill said in a statement.
"While the discussions with Santos did not result in a transaction, Woodside considers that the global LNG sector provides significant potential for value creation," she added.
Reuters reported that Santos’ shares dropped by close to 9% following the news and Woodside’s stock rose by a modest 1%.
The report also cited two unnamed sources as saying the reason for the breakdown of talks was that the two companies could not agree on the price tag for the deal.
News of a tie-up between the two Australian energy majors first emerged in December when the two confirmed reports they were discussing a merger. It followed two megadeals closed by Exxon and Chevron in the U.S. in previous weeks.
Both Woodside and Santos stressed at the time that the talks were at an early stage and the chances of them ending in a deal were basically anyone’s guess.
If the merger had gone through, it would have resulted in a new LNG giant on the global scene with capacity comparable to that of BP, the FT noted in its report on the talks breakdown news. ABC reported the combined LNG capacity of the merged company would have been some 16 million tons annually.
However, it seems investors could not be convinced that the deal would make sense financially or strategically.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.