Ever since the initial announcement earlier this year, I have followed the Santos takeover bid by XRG-Carlyle closely. It had all the makings of a Netflix/HBO documentary: a foreign state-backed giant, a homegrown champion, a multibillion-dollar price tag, and a plotline that pitted national pride against global capital.
Founded in 1954, Santos is more than just an energy company. It’s the backbone of Australia’s domestic gas supply, with operations stretching across the Cooper Basin and beyond. Which is why when ADNOC’s investment arm, XRG, launched a $18.7 billion takeover bid earlier this year, the deal felt less like finance and more like an episode of Succession.
At the center of the drama was a test: national interest vs. foreign government ownership. In Australia, the ultimate gatekeeper for foreign takeovers is the Foreign Investment Review Board (FIRB), reporting up to Treasurer Jim Chalmers - a hip-hop enthusiast known for his renowned academic work on former Prime Minister Paul Keating and for delivering back-to-back budget surpluses. Under the Foreign Acquisitions and Takeovers Act 1975, Chalmers has the authority to block any deal deemed “contrary to the national interest.”
The national interest test looks closely at these factors:
National security: Santos is the largest supplier of domestic gas in Australia. Regulators are worried that a foreign owner might chase LNG export dollars at the expense of local supply, even as the East Coast faces recurring gas shortfalls.
Competition: Would a foreign acquisition distort the domestic market?
Economic and community impact: Jobs, communities, and the weight of union lobbying mattered. The powerful Offshore Alliance union publicly urged the government to block the bid, pointing to the UAE’s human rights record on workers.
Foreign affairs: Was this a purely commercial investment, or a strategic play by a foreign state?
Then there is the silent but obvious political calculus aspect of the test which has to do with appealing to constituents.
So, the regulatory approval for this deal is tricky, but not surprising. All parties know what they are getting into and prepare accordingly. On the other hand, and to my surprise, the commercial negotiations were the real deal blockers.
Tax liability bombshell: Santos’ 2021 acquisition of Oil Search in Papua New Guinea created hidden complexity. A new PNG Income Tax Bill (effective 2026) will impose a capital gains tax on mining and oil & gas interests. That meant Santos carried a looming liability worth hundreds of millions. Santos wanted XRG's consortium to assume it; XRG felt otherwise and countered by trimming $300 million off their offer.
Methane leak scandal: While the tax liability issue was being discussed, XRG’s consortium learned from the media, not management, about methane leaking from Santos’s Darwin LNG plant, a problem dating back to 2006. Huge reputational and environmental implications. Suddenly, what looked like a clean due diligence process became a trust deficit.
Labor and ESG pressure: Worker rights and environmental concerns fueled opposition, sharpening the sense that this deal wasn’t just commercial, it was cultural, political, and ethical.
This wasn’t Santos’ first dance.
2015 – Scepter Partners ($7.1B): Rejected as opportunistic during low oil prices.
2018 – Harbour Energy ($10.8B): Collapsed over valuation and leverage concerns.
2023 – Woodside merger talks: Derailed by valuation disputes and clashing growth strategies.
2025 – ADNOC/XRG ($18.7B): Died on tax liabilities, methane leaks, and national interest tests.
The positives from this are that valuation has been on upward trajectory, and there seems to be no shortage of interest in Santos or the opportunity Santos presents. My concern however is that the company appears to not be adequately prepared to get acquired.
What every CEO, CFO, and board member should take away if they hope to someday sell or merge their business:
Run Your Company Like It’s Always for Sale: Build goodwill with governments and communities. If putting your community first, via domestic supply obligations, is seen as core to your identity, a buyer inherits not just assets but trust.
Communicate Transparently, Early, and Often: Tax liabilities, regulatory changes, ESG risks, don’t bury the lede. Surprises kill trust faster than bad news delivered early.
Manage Skeletons Before They Manage You: Methane leaks that go unaddressed for nearly 20 years don’t just spark regulatory fines, they spark suspicion. Transparency is cheaper than reputation repair. Compliance is cheaper than non-compliance.
Valuation Is Never Just Numbers: Politics, national pride, and ESG considerations can weigh just as heavily as discounted cash flows. Smart capital allocators respect that equation.
For Santos, the failed ADNOC deal may not be the end of the story, but it’s another chapter in a long saga of failed suitors. For the rest of us, it’s a reminder: If you hope to be acquired, act like it from day one. That means aligning commercial ambition with community trust, pairing growth with transparency, and managing your company’s narrative as carefully as you manage its balance sheet. In the world of energy and infrastructure, deals aren’t just about barrels and BCFs. They’re about trust, timing, and the stories you tell.
1 The views expressed in this article are solely those of the author and do not represent the opinions of any affiliated organizations or entities.