the australian newspaperQGC set for offers as Santos...

the australian newspaper


QGC set for offers as Santos snubbed
Andrew Fraser
November 14, 2006
COAL seam gas producer Queensland Gas Company has set up a "data room" to respond to future takeover proposals, but continues to insist that the $1.26-a-share offer by Santos seriously undervalues its future growth.

At the annual general meeting in Brisbane yesterday, which had the fervour of a religious revival, managing director Richard Cottee dismissed calls by Santos for an independent valuation of the company.

"You, the shareholders, know the true value of the company," he said. He said Santos had wanted to "stop the clock" on the company's growth, as the offer was based on the company's value now, and not what it could produce in the future.

Mr Cottee said the company was producing over 11 petajoules a year when it had only forecast in its prospectus it would be producing 6pj a year at this stage, and he also predicted there would be a growing demand for natural gas because of broader community and political concern about greenhouse gases.

"No wonder we are like the voluptuous maiden in a football locker room," Mr Cottee said.

"They may proposition us, but we will not consent."

Santos purchased 3.9 per cent of QGC the day before it launched its $606 million takeover offer, but Mr Cottee said that since then not one share had been sold to Santos.

"We don't think the $1.26 offer is getting any traction in the market whatsoever," he said.

"At this stage we are concentrating on building up our core business and ramping up for growth. We are not just trying to ramp up our shares and sell at the highest price possible, per se."

But while Mr Cottee made several derogatory references to "mother Santos" and the "tender loving arms of Santos" during the meeting, he did leave the way open for other suitors.

"If we receive something that is in our shareholders' interest we will certainly allow the shareholders to decide," he said.

Earlier, company chairman Bob Bryan said "it is not appropriate that we respond with a 'for sale' sign and a price tag".

Mr Bryan said QGC's proved and probable reserves now stood at 695pj and firm gas sales agreements would reach 23pj per year by August 2007, while gas used at the Condamine power station near Chinchilla on the Darling Downs was estimated to use a further 10pj on top of that.

After the meeting, Mr Cottee said the "data room" would put together information about the company's future contracts and forecasts that were not publicly available.

"There will come a time when we need to make sure we are acting totally in our shareholders' interest, but at this point in time with a $1.26 offer, it is not in our shareholders' interest to disgorge all of our trade secrets when the market is telling us that there is no dire necessity for it," he said. "Ours is consistent with good corporate behaviour. We have prepared ourselves in case we do get a credible offer."

QGC, which was trading at 40c a year ago, opened yesterday at $1.40 and dropped to $1.385 before rallying to close at $1.39.