Santos Ltd (ASX: STO) shares have been in the spotlight this week.
That's because the energy giant has received a takeover offer from a consortium led by Abu Dhabi National Oil Company (ADNOC).
The consortium, known as the XRG Consortium, has offered to acquire all outstanding Santos shares for US$5.76 per share (approximately A$8.89 per share) in cash via a scheme of arrangement.
This valued Santos at approximately A$30 billion.
And while Santos hasn't gone so far as to accept the offer, it has granted due diligence access. It has advised that if satisfactory terms can be agreed upon, its board intends to unanimously recommend the deal to shareholders.
Let's see what analysts at Macquarie Group Ltd (ASX: MQG) are saying about the deal.
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What does Macquarie think of the Santos takeover?
Macquarie appears to see the offer as fair for shareholders.
And although Woodside Energy Group Ltd (ASX: WDS) has previously been interested in a merger with Santos, Macquarie doesn't believe that any competing proposal will be tabled. Though, it doesn't completely rule it out. It said:
The US$5.76/sh cash proposal is a "final non-binding indicative offer", and follows 2 confidential proposals in March (US $5.04/sh & US$5.42/sh). EV/EBITDAX of 6.2x 2026e, 6.0x 2027e. Based on our risked-DCF analysis, we believe the deal implies US$69.25/ bbl (vs STO shares implying US$59.40/bbl on Friday's close on the same methodology) – above our long-term oil price assumption (US$65/bbl).
A competing offer looks unlikely, given STO has been "in play" for quite some time (however, other private equity or NOC's can't be ruled out now that an offer has been publicised).
Should you buy Santos shares?
Despite its jump on Monday, Macquarie highlights that Santos shares are still trading well below the takeover offer price at $7.72.
In light of this, the broker thinks investors should be snapping up shares while they are trading at this discount. Especially given its view that regulatory hurdles can be navigated successfully. It said:
Maintain Outperform. Market has reacted to Israel-Iran conflict and the XRG/Carlyle takeover proposal simultaneously. Regulatory risks can be navigated in our view, and therefore we believe investors should earn a good portion of the ~15% remaining return through the due diligence phase.
Macquarie currently has an outperform rating and $8.85 price target on Santos shares. This implies potential upside of 15% for investors from current levels.
