Santos returns to the fray with increased takeover offer for Queensland Gas Angela Macdonald-Smith January 31, 2007
SANTOS, Australia's third-biggest oil and gas producer, has increased its takeover offer for Queensland Gas, seeking to better AGL Energy's rival bid for a stake in the producer of natural gas from coal seams.
Santos proposed to pay $710 million, or $1.30 a share, for some Queensland Gas assets, and to spin off the rest in a new company for about 50¢ a share, Adelaide-based Santos said in a statement yesterday.
Queensland Gas last month agreed to sell a 27.5 per cent stake to AGL Energy for $1.44 a share after rejecting an earlier bid by Santos.
Brisbane-based Queensland Gas, known as QGC, is attractive to both bidders as Santos needs more reserves to replace ageing gas fields in central Australia and AGL wants its own gas supply for its retail customers and power stations.
"This revised offer might get a bit more attention, depending largely if you take the 50¢-a-share valuation for the new QGC at face value," said Brendan Fitzpatrick, an analyst at Aegis Equities Research in Sydney.
"Santos is more interested in the operational assets, while Queensland Gas wants to make use of the exploration potential, so this might be a compromise that allows them both to achieve something positive."
Queensland Gas shares jumped 24.5¢, or 18 per cent, to $1.61. Santos shares fell 11¢, or 1.2 per cent, to $9.25, while AGL shares rose 68¢, or 4 per cent, to $17.76.
Santos' proposal is "conditional and incomplete" and isn't yet in a form that can be compared with AGL's offer, Queensland Gas said in a separate statement.
"However, elements of the Santos proposal appear to be attractive to QGC and its advisers are considering the proposal," Queensland Gas said. In the meantime, the board continued to recommend AGL's proposal, it said.
Queensland Gas is being advised by JPMorgan Chase & Co and ABN Amro Morgans. UBS AG is advising AGL, and Caliburn Partnership is advising Santos.
"Santos believes that its proposal is superior to the current AGL Energy proposal and, unlike that proposal, gives QGC shareholders an opportunity to exchange all of their shares at an attractive price," Santos said in the statement.
AGL could not yet say how it might respond to Santos' offer, said spokesman Deane Russell.
Queensland Gas managing director Richard Cottee said: "Santos' proposal is going to have to become an offer at some point.
"At this stage we have a very certain deal that we're very happy with, with AGL."
BLOOMBERG
QGC Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
