Australia's Woodside Energy and Santos said on Feb. 7 they had ended merger talks to create a possible $52 billion global oil and gas giant, and Santos flagged it would look for other ways to bolster its value.

Woodside, which is more than twice as large as Santos by revenue and market capitalization, said it would only pursue a deal that would clearly benefit its shareholders.

Santos shares fell nearly 9% after the announcement and closed down 5.8% while Woodside's stock ended up 0.5%.

The talks, first announced in December, fell apart as the two companies could not agree on a valuation level, according to two sources with direct knowledge of the matter who could not be named discussing confidential information.

A firm bid did not emerge from Woodside following the almost two months of due diligence and negotiations that the parties undertook, one of the sources said.

Woodside declined to comment on those points and Santos did not immediately respond to a request for comment.

Santos said in a statement that after "an initial exchange of information, sufficient combination benefits were not identified to support a merger that would be in the best interests of Santos shareholders".

If the merger had taken place, it would have created a major global LNG producer that could attract more offshore investors as gas is seen as a key bridging fuel in the shift to cleaner energy.

"While the discussions with Santos did not result in a transaction, Woodside considers that the global LNG sector provides significant potential for value creation," Woodside CEO Meg O’Neill said in a statement.

Woodside had faced pressure from some investors not to pay a premium for Santos in what would have been one of the largest corporate takeovers in Australian history.

"Woodside's decision to walk away is a relief," said Simon Mawhinney, chief investment officer at Allan Gray, which holds about $456 million worth of Woodside stock. The fund last week wrote to management warning against pursuing a deal.

"We had hoped this would be the outcome," Mawhinney said. "It was unclear to us where there was much merit in a tie up."

For Woodside, this is the second time in just over eight years that it has ditched a deal that would have given it gas assets in Papua New Guinea, prized for their low production costs and proximity to big LNG buyers in north Asia.

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