BG likely to acquire Australia's Pure Energy after upping bid

28 February 2009

Upping the stakes in its battle to acquire Australian coal-seam gas producer Pure Energy Resources Ltd, UK's BG Group Plc has raised its offer to A$1.03 billion ($667 million), which is 15 per cent higher than its earlier offer. However, the bid is conditional on getting 90 per cent of the stock.

BG's previous offer was already higher than that of Arrow Energy Ltd, which is Royal Dutch Shell's partner in Australia for coal-seam gas. The company hopes that the latest offer will be a knock-out punch for Arrow and Shell.

The cash offer of A$8.25 a share, a 3.1-per cent increase over the previous offer, is final in the absence of a higher bid, the UK company said in a statement on Friday. BG, Shell and Arrow are seeking more reserves to feed proposed liquefied natural gas projects in Queensland that could meet the rising demand in north Asia for cleaner-burning fuels.

BG's bid is in cash, and has been recommended by Pure's directors, who had already endorsed the previous bid. Even before this increase, Arrow had said it was weighing whether to proceed with its bid, or spend the cash on drilling its own projects.

Matters are complicated by the fact that Arrow already owns about 20 per cent of Pure and Shell owns 11 per cent. BG has built up its stake to 29 per cent after Brisbane-based Pure's independent directors and two key shareholders earlier this week accepted BG's earlier offer.

Shell yesterday reiterated that it was continuing to evaluate all offers for Pure. Pure today repeated in a separate statement that its independent directors unanimously recommend shareholders accept BG's offer in the absence of a higher bid.