Australian Market Struggles With Closing Top Deals

Australia’s inability to close top M&A deals is becoming a growing frustration. The collapse of Abu Dhabi National Oil Company’s (ADNOC) $18.7 billion takeover bid for Santos (OTCPK: SSLZY) (the nation’s biggest supplier of natural gas) earlier this month is just the latest example. Valuation disputes, regulatory hurdles, and unexpected revelations are making Australia one of the most challenging places in the world to finalize big-ticket deals.

“While the Consortium maintains a positive view of the Santos business, a combination of factors, when considered collectively, have impacted the Consortium’s assessment of its indicative offer,” ADNOC’s investment arm XRG said in the statement last week.  The combination considered included capital gains tax questions, regulatory uncertainty, and a reputational blow from a methane leak story that broke at the worst possible time.

The leak wasn’t small. Documents revealed that a storage tank at the Darwin LNG plant had been seeping methane since 2006, at rates up to 184 kilograms an hour. For nearly two decades, it remained largely hidden, with regulators aware but the public and Northern Territory cabinet kept in the dark.

Santos inherited the problem when it bought the plant in 2020, but instead of fixing it, the company secured approvals to extend the facility’s life to 2050. When ABC News exposed the leak, the fallout spooked ADNOC, raising questions about transparency, governance, and environmental risk.

Interestingly, it is not the first time that a Santos deal collapsed. Merger talks between Woodside Energy (NYSE: WDS) and Santos collapsed in 2023 due to valuation gaps.

Meanwhile, BHP’s (NYSE: BHP) $49 billion approach for Anglo American (OTC: AAUKF) fell apart in 2024 after repeated rejections and disputes over spinning off South African assets. Brookfield’s $10.6 billion offer for Origin Energy was rejected by a shareholder vote that fell short of the required 75% threshold. Albemarle’s (NYSE: ALB) 6.6 billion Australian dollars play for Liontown Resources in lithium was abandoned due to “growing complexities,” including national sensitivities over critical minerals. Even private equity giant KKR (NYSE: KKR) abandoned its 88 Australian dollar-a-share offer for Ramsay Health Care in 2022 after being denied access to the financials of its European subsidiary.

The common threads? Misaligned valuations, regulatory bottlenecks, shareholder resistance, and the weight of disclosure risks. In Australia, time is stretched by a web of reviews from the Foreign Investment Review Board, the Australian Competition and Consumer Commission (ACCC), and multiple tax authorities.

“Time kills deals, whether it’s a private M&A or public M&A, losing momentum is definitely a trend of the current M&A environment,” Lance Sacks, a corporate partner at Baker McKenzie, said for Reuters.

While ACCC pursues what the market considers an overreach, corporate regulator ASIC acknowledges the friction and is pushing reforms to make public and private markets more appealing.

“Public markets are facing increasing pressures, from global competition to changing investor preferences. While regulation is not the primary driver of market attractiveness, ASIC is enhancing specific regulations to support Australia’s market appeal,” the regulator wrote in Monday’s progress update.

Without a more straightforward path through regulation, Australia risks deterring global capital, which may be necessary to capitalize on the ongoing commodity cycle fully.

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