Santos suitors fire back at Stokes over $36bn bid claims

The unusually blunt exchange escalates a brewing war of words over the national interest implications of the proposed $36bn foreign acquisition of Santos.

Ryan Stokes has insisted the $36bn acquisition of Santos is not in Australia’s national interest. (John Feder/The Australian.)

The Abu Dhabi-backed consortium pursuing a $36bn takeover of Santos has accused Ryan Stokes of an overt attempt to derail its bid so Beach Energy – in which his family is the largest shareholder – can secure prized domestic assets.

The unusually blunt exchange escalates a brewing war of words over the national-interest implications of the proposed acquisition by Abu Dhabi’s state oil producer ADNOC and US private equity giant Carlyle, which has already drawn scrutiny from Canberra and competitors in the Australian gas market.

Mr Stokes on Tuesday joined the criticism, warning that the deal was not in the national interest and lending weight to arguments first made by Beach Energy chief executive Brett Woods. Mr Woods has argued that the transaction has serious energy security implications.

Beach is one-third owned by SGH, where Mr Stokes is CEO. His father, billionaire Kerry Stokes, is the group’s chairman and largest shareholder.

While the consortium had until now sought to avoid a direct clash with its critics, a spokesman on Wednesday hit back at Mr Stokes’ comments, accusing him of trying to influence the federal government’s review of the bid.

“These remarks are clearly opportunistic and reflect a commercial interest in the outcome,” the spokesman said. “Our proposed investment is made with a long-term horizon in the Australian gas market, which we consider is in the national interest. The reality is clear: the best outcome for domestic gas customers is investment for the benefit of the Australian economy. This will require strategic investors who have capital that will drive growth to meet the rising demand for energy.”

Santos LNG plant.

The rebuke reflects frustration within the consortium at some commercial opposition to the transaction. The deal is subject to review under the Foreign Acquisitions and Takeovers Act, which gives Jim Chalmers broad powers to block or impose conditions on foreign investment if it is deemed contrary to the national interest.

Those powers extend to ordering divestments of certain assets – a possibility that has attracted intense interest from Beach and other potential buyers of Santos’ Australian gas business.

Beach has long been open about its ambitions to acquire additional domestic gas assets, a strategy that could be aided if the Treasurer forced ADNOC to offload Santos’ Australian portfolio as a condition of approval.

However, industry sources say questions remain about Beach’s ability to fund a multibillion-dollar acquisition, despite the company’s improved balance sheet and supportive major shareholder.

The takeover battle is likely to come down to the decision of the Treasurer, as a series of Santos shareholders support the deal. Some Santos’ shareholders have been vocal critics of the company’s share price performance.

While Dr Chalmers is under mounting pressure, ADNOC has positioned its offer in the context of Australia’s looming gas shortfall. The Australian Energy Market Operator has warned the country’s east coast will experience a gas shortfall from 2029.

The company has argued that the ADNOC-Carlyle partnership would accelerate investment in Australia.

Canberra’s verdict on the deal will be a test of its approach to foreign investment in the energy sector at a time when the government is under pressure to guarantee domestic supply and accelerate the energy transition.

Santos shares were down 3.5c at $7.895 on Wednesday afternoon.

Originally published as Santos suitors fire back at Stokes over $36bn bid claims