A potential Woodside Santos merger is being discussed, but it’s not sure thing

Nick Sundich Nick Sundich, December 8, 2023

Last night, a bombshell was dropped on the ASX with a plans for a Woodside Santos merger being leaked to the media, forcing both companies to address the rumours.


A Woodside Santos merger is being discussed

Santos and Woodside told both their investors that talks were on, but no certainty to proceed. ‘Discussions remain confidential and incomplete, and there is no certainty that the discussions will lead to a transaction,’ the latter company said. The former company said the same thing, but also that it was ‘assessing a range of alternative structural options with a view to unlocking value as referred to on Santos’ investor day’.

It caps off a busy week for M&A activity with a hostile bid for Perpetual yesterday, as well as a proposed merger involving uranium play 92 Energy (ASX:92E) being unveiled to investors today.


Why the merger?

Woodside is already the largest oil and gas stock on the ASX. However, a Woodside Santos merger would create one of the largest companies in the world. A mega merger would not be an anomaly – in the last 2 months, ExxonMobil bought Pioneer Natural Resources for US$60bn and Chevon bought Hess for US$53bn.

The logic there was that bigger is better and that is what both companies likely believe. Santos has long been regarded as undervalued by its investors and Woodside has not exactly shined either even in spite of high oil and gas prices.


Is it going to happen?

Whether or not it is a good deal will depend on the terms of the binding offer and then what eventuates after that. Shareholders may judge that question just by the premium, although we think they should not get their hopes up for a huge premium, if past precedent is any guide. Investors of all stocks in the oil and gas sector will watch the talks with interest!


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