Santos CEO Kevin Gallagher still committed to the cause despite takeover setback

Santos chief executive Kevin Gallagher. Picture: Brenton Edwards

Kevin Gallagher would have tucked away his $50m payout from Abu Dhabi’s bid for Santos and kept working for the love of it, had the takeover offer made it across the line.

It’s a point the Santos boss was at pains to make while talking to the media on Friday, amid the fallout from XRG’s withdrawal of its $30bn bid.

Believe it if you will. Plenty won’t.

Gallagher would have collected around $48m at the $8.89 initial offer price from XRG, at a minimum, just on the value of the Santos shares he already owns.

And the final package may well have been far more, given he’s still sitting on around 2.4 million as yet unvested share rights – worth another $21m if they were triggered as part of XRG’s takeover. Sadly we’ll never know the answer to that question now.

Even without the extra sweetener, it’s a tidy sum to tuck away as you’re looking for another job.

But Gallagher says he would definitely have stayed on, telling reporters “it made no difference to me who the owners were going to be”.

We’re guessing the instalment of a fresh board – perhaps one less enthralled by the cult of Gallagher – might have made a bit of difference.

“XRG wanted the management team to remain. They had a lot of respect and a lot of admiration for the management team at Santos,” he told reporters.

Which is curious, because Margin Call hears that a deal over a formal retention scheme for Santos senior staff (with or without Gallagher) was one of the many issues that weren’t resolved before the company’s board issued its demand that XRG cough up or walk.

These things are tricky to negotiate in cash buyouts by unlisted vehicles, you see. Difficult to offer employee share schemes when there’s only one owner, so it’s generally cash or a profit share as your best incentive.

And, even if you believe Gallagher’s avowed intention to stick around, there would have been plenty of long-term Santos staff salivating at the prospect of cashing out their stock and heading off to an early retirement, or another job. And it would hardly have been in XRG’s interest to just let them go, not when there’s a big complex business to keep running.

Now, with an $8.89 a share bid from Abu Dhabi off the table, it leaves Gallagher back to his familiar script of promising that Santos’ growth projects in Australia, PNG and Alaska will eventually make up the loss of yet another deal to Santos shareholders.

Why would you doubt him? Particularly when sophisticated players such as Woodside and XRG have gotten an inside look at those options over the last few years, and decided they weren’t worth the price.

It was the Santos board that put a deadline for XRG to piss or get off the pot. Yet Gallagher took an unusually conciliatory tone about XRG on Friday, a far cry from his pugnacious best. There’s no animosity, he said, the people at XRG are good people, everything was very cordial and professional, they just couldn’t get there in time to do the deal.

A sign of some regrets at Santos, perhaps? Even though XRG’s bankers have been playing down the prospects of a return bid in the wake of the deal’s collapse, all XRG has ever said is that it will take a “disciplined” approach to takeovers.

If Santos isn’t worth $8.89, what is it worth? Closer to $8, or even lower?