Woodside is facing opposition from a significant shareholder over its proposed $57bn (A$86.34bn) merger with smaller rival Santos, reported Reuters.
Allan Gray Australia, which holds around a A$700m stake in Woodside, has expressed that paying a premium for Santos would not be in the best interests of Woodside’s shareholders.
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In an interview with the news agency, Allan Gray Australia CIO Simon Mawhinney said that in a letter to Woodside, the fund said such a move would destroy its value.
Although Mawhinney did not share the letter with the media outlet, he mentioned that this letter followed several emails to Woodside’s management and board voicing Allan Gray’s concerns.
The fund manager also has a substantial A$300m investment in Santos.
“We like both companies but its about relative value. Woodside shareholders would be diluted even at today’s share price,” he said.
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By GlobalData“If they paid a premium it would be even a greater dilution. We think they should walk away, we don’t think this transaction should happen.”
The talks over a potential merger were confirmed by both companies in December 2023. The merger aims to create a joint entity with assets across the globe.
The acquisition price has been a concern for the shareholders of Santos, who have been seeking a significant premium.
After a court ruling last month that removed a significant obstacle to Santos’ $4.3bn Barossa natural gas project, the shareholders’ case got a boost.
However, just days later Woodside CEO Meg O’Neill appeared to play down expectations of a huge premium, stating that the market should not expect one, referencing recent oil and gas transactions in the US and Europe that concluded with minimal premiums.
The Woodside-Santos deal is part of a broader trend of consolidation in the energy sector, where recent acquisitions have been completed with relatively modest premiums.
For example, ExxonMobil’s acquisition of Pioneer Natural Resources and Chevron‘s purchase of Hess were finalised with premiums of 18% and 5%, respectively.
