Published 11:36 AM, 9 Feb 2009 Last update 4:42 AM, 10 Feb 2009 Pure Energy reviews BG's $796m takeover offer TOP News US stocks turn mixed on gloomy earnings, falling oil prices 8:17 AM Nissan to slash 20,000 jobs globally 1:16 AM US Treasury delays bank bailout plan 12:45 AM Aristocrat lowers fiscal FY08 guidance 7:49 AM Local stocks tipped to open flat 7:33 AM
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Australian coal seam gas explorer Pure Energy Ltd is reviewing the $A796 million ($US538 million) takeover bid from British energy firm BG Group plc, and it has advised shareholders to take no action on the offer at present.
BG Group launched the all-cash takeover bid of $6.40 a share for Pure Energy on Monday, its third acquisition move in Australia, trumping an earlier bid by Arrow Energy Ltd.
The offer is at a 19 per cent premium to the implied value of Arrow's $5.39-a-share offer.
Pure Energy shares have been in a trading halt since Friday and last traded at $5.28. At 1615 AEDT, Arrow Energy shares closed the day of trading 11.71 per cent higher at $2.48, having touched as high as $2.67.
In London, BG's shares edged down 0.83 per cent to 1,076.00 pence, as the broader market rose around half a per cent.
BG said its all-cash offer was higher than the offer made for Pure Energy by Arrow Energy on December 22. The UK energy giant said it had already built up a 10 per cent stake in the target.
"BG Group's offer gives Pure shareholders the certainty of cash at a time of heightened uncertainty in world equity and financial markets," BG said in a statement to the Australian Securities Exchange (ASX).
Arrow, which has a 19.9 per cent stake in Pure Energy, is offering $2.70 cash and 1.21 of its own shares in a $673 million cash and stock bid for the oil and gas producer. It planned to fund the cash component from its recent $776 million deal with Shell, through which international energy company took a 30 per cent stake in Arrow's upstream tenements in Australia.
"Arrow may sell its stake and pocket the money but there is some speculation that Arrow may also become a takeover target," an analyst, who asked not to be identified because of company policy, said.
The bidder's statement from Arrow Energy’s offer includes a standard one per cent break fee, which works out at about $6.7 million, as well as a smaller break fee of $2 million, payable if any single independent director of Pure Energy changes his support for the Arrow bid.
Analysts have said that Australia's three proposed coal seam gas-fuelled LNG projects in Queensland are headed for consolidation as rivals seek the most profitable way of developing their respective projects.
BG acquired rival coal seam gas producer Queensland Gas Company in a $5.6 billion cash offer last October, after failing to gain control of Origin Energy a year earlier. Origin rejected BG's offer and sold 50 per cent of its coal seam gas reserves to US energy major ConocoPhillips in an $US8 billion joint venture deal that implied a much higher value to Origin.
On Monday, BG said it was in the final stages of integrating Queensland Gas, which is based in the Surat Basin in Queensland and employs more than 300 people, into the group.
BG said its offer for Pure Energy was conditional on gaining regulatory approvals, as well as at least 50.1 per cent of acceptances.
In a statement on Monday afternoon, Arrow Energy said the scrip component of its offer was attractive to Pure shareholders.
“We have presented a compelling offer to Pure shareholders, including Arrow scrip which is significantly undervalued particularly if you use the BG offer for Pure as a valuation guide. We think the scrip component of Arrow’s offer is attractive to Pure shareholders both from a value and tax perspective," chief executive Nick Davies said.
"By accepting Arrow’s cash and scrip offer, Pure shareholders will be afforded the opportunity to share in further upside associated with Pure and Arrow’s assets and the CSG sector in general.”
"Its hard to say if Arrow will up its offer," said Chris Brown, an oil and gas analyst at ABN AMRO in Sydney. "Arrow needs the gas for the LNG project but it will have to be mindful of the total cost."
Global energy majors are targeting coal seam gas, which is found in underground coal deposits, as a new feedstock for liquefied natural gas (LNG) plants.
LNG demand is forecast to more than double by 2020, driven by an increase in energy consumption and demand for cleaner burning fuels.
AOE Price at posting:
$2.48 Sentiment: None Disclosure: Not Held
