Agree to takeover bid, Arrow recommends22/03/2010 7:14:10...

Agree to takeover bid, Arrow recommends
22/03/2010 7:14:10 PM
Arrow Energy Ltd is urging shareholders to accept a sweetened joint takeover bid from Royal Dutch Shell and PetroChina Co Ltd, calling it the right step at the right time.

"We believe in a nutshell this creates value now and value ongoing," Arrow's chairman John Reynolds said on Monday.

The new bid includes a cash component of $4.70 per share, up from the earlier bid of $4.45, and a reworked proposal for Arrow's international business.

RBS Morgans senior oil, gas and energy analyst Nik Burns says that under his valuation, the new deal would be worth $5.45 per Arrow share, or $3.99 billion in total.

If the proposal clears shareholder and regulatory approvals, Arrow's international business will be de-merged and listed on the Australian stock market as Dart Energy Ltd.

Arrow chairman John Reynolds said the offer was good for shareholders.

"Arrow has indeed travelled a clear and very disciplined strategic path and we see this as one more highly successful step in this exciting and ongoing journey," Mr Reynolds said.

"The board strongly believes that this proposal is the right step at the right time, and elegantly combines the present and the future in both benefits and value for our shareholders."

If the deal is accepted, Dart Energy will include Arrow's 90 per cent interest in Arrow Energy International Pty Ltd, which holds assets in China, India, Vietnam and Indonesia.

Dart Energy will also control farm-in rights into Apollo Gas Ltd's licences in New South Wales, and be given a $45 million cash injection, and a $US25 million ($A27.31 million) loan facility from Shell.

Dart has also been promised cooperation with PetroChina in relation to future coal seam gas opportunities in China.

Shell will have to give up its potentially valuable back-in rights to various Arrow projects if the deal proceeds.

Shell Australia chairman Russell Caplan said the company did not foresee problems with Australia's Foreign Investment Review Board (FIRB) allowing the deal.

"The discussions that we have had so far have not led us to believe that we are going to have anything other than support for this," Mr Caplan said.

"This proposal brings together Shell's LNG expertise, PetroChina's access to the Chinese energy market and Arrow's expertise as a leading coal seam gas operator, to build a world class coal seam gas to LNG business.

"We believe that the joint venture companies' secure access to the Chinese market and the global demand for LNG more generally support the development of Queensland's coal seam gas resources over the coming years."

Arrow chief executive Nick Davies said the company's Fisherman's Landing LNG plant, expected to be built by LNG Ltd, was clearly not in Shell and PetroChina's base plans.

"That's for LNG Ltd to decide ... but the project has a lot of good things going for it," he said.

Arrow's major shareholder, New Hope Corporation Ltd, is poised to agree to the takeover offer according to reports.

Arrow Energy shares fell 19 cents to $5.10 on Monday after coming out of a trading halt.

"I think the impression that Arrow were giving its constituents was that they wouldn't settle for anything under six dollars and were looking for something more," Bell Potter senior adviser Stuart Smith said.

"That hasn't happened and I think they were being a bit overzealous and running the risk of Shell walking away altogether."

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