11:02 AM, 12 Feb 2009 Michael Feller
Gas battle heats up
The battle for gas company Pure Energy Resources heated up last night with Arrow Energy announcing that it will increase its cash and scrip offer to $7.16 a share. It suggests that Arrow's major shareholder Shell could be getting serious about coal-seam gas in Australia.
In response to BG Group's bid on February 9, Pure shareholders now have on the table an offer of $3 cash and 1.57 Arrow shares for each Pure share. The revised offer represents a 21 per cent premium to Arrow's first offer on December 22 and a 12 per cent premium to BG Group's $6.40 all-cash offer.
Pure's directors seem keen, immediately getting behind the proposal with a unanimous recommendation, subject to there being no superior offer. This contrasts with its vague response to BG's proposal on February 9: “The independent directors of Pure, in conjunction with their financial and legal advisors, are currently reviewing BG's offer and will provide their recommendation in due course." Hardly a stirring endorsement.
The friendly reception that Pure is offering Arrow is no doubt pleasing not just for Arrow, but for its major shareholder Shell, which is staring down its fellow British rival BG in the great antipodean coal-seam gas game.
Arrow yesterday announced that it had signed off on the third stage of its coal-seam gas alliance with Royal Dutch Shell, enabling the staged payment of the last $US155 million. Shell's 30 per cent interest in Arrow and 10 per cent interest in Singaporean subsidiary Arrow International have earned $US454 million for the Brisbane-based firm, lead by BP's former head of Asian gas and power, Nick Davies. And Shell is just the sort of partner Arrow needs to fulfil its own ambitions, says Davies: "Working with a global energy giant like Shell will assist Arrow to make the most of its world class upstream assets and expertise."
"This alliance will significantly advance Arrow's development plans, accelerate our push into LNG export, create hundreds of jobs in Queensland, and position the company as a dominant player in the global coal-seam gas marketplace," he added.
It's good news too for Arrow's Wilson HTM advisor Simon Keyser, who was almost guzumped by BG's offer, which is being advised by Gresham heavyweights David Feetham and Michael Ashforth. Brisbane-based Keyser advised Babcock & Brown Infrastructure on its 2006 bid for GasNet and coal miner Felix Resources on takeover offers mid last year. A successful outcome for Arrow and Wilson HTM would solidify the mid-size broker’s Queensland base.
It is unlikely however that BG will back down. It's possible that Pure is more important to BG – which recently snapped up complimentary assets in the form of Queensland Gas – than it is to Shell or Arrow.
Besides its 30 per cent acquisition of Arrow, Shell hasn't shown as much interest in Australian coal-seam gas assets as BG, ConocoPhillips or Malaysia's Petronas. Furthermore, its 2007 acquisition of Regal Petroleum's gas fields in the Ukraine and its massive gas-to-liquids plant in Qatar already make it something more than just a major global player.
As for BG, it said it would make a decision on whether or not to match Arrow's bid by the opening of trade on Wednesday, February 18. It recommended that Pure shareholders take no action before then.
BG’s bid is being supported by Braddon Jolley and Jaclyn Riley-Smith from Corrs Chambers Westgarth. Arrow’s team is backed up by John Humphrey from Mallesons Stephen Jaques. Pure Energy’s advisors are led by Russel Keating and Nick Bagot from Goldman Sachs JBWere and Neil Pathak from legal firm Freehills.
PES
pepper residential securities trust no. 21
