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BG Group bids for Australian gas company

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By Peter Smith in Sydney

Published: February 9 2009 05:24 | Last updated: February 9 2009 05:24

BG Group, the UK oil and gas group, plans to deepen its presence in Australia’s fledgling coal seam methane gas industry after launching a A$796m takeover bid for Pure Energy Resources.

Monday’s cash bid trumps a rival offer for Pure Energy from Australia’s Arrow Energy.

It comes after BG last October agreed to buy Queensland Gas Company in an A$5.6bn deal – the latest example of consolidation among smaller energy companies prompted by the falling price of oil and financial market turmoil. BG is now in the late stages of integrating Queensland Gas, which is based in the Surat Basin.

BG has made repeated attempts to become a lead player in Australia’s industry for coal seam methane gas – gas found in coal deposits

Last year the UK energy group abandoned a A$13.8bn takeover offer for Origin Energy, an Australian group with extensive coal-bed methane assets. BG was rejected by Origin’s board at the 11th hour with the Australian group subsequently agreeing a joint venture with ConocoPhillips, the US oil group, for A$9.6bn.

Australia’s coal-bed methane is a relatively undeveloped resource that has attracted interest from several international groups.

Royal Dutch Shell last year joined forces yesterday with Arrow Energy to develop projects in Australia and international markets when it agreed to invest up to A$776m to buy 30 per cent of Arrow’s coal bed methane acreage in Queensland and 10 per cent of its international assets. Arrow is also a major shareholder in Pure Energy.

BG’s offer for Pure Energy is pitched at A$6.40 a share, which compares with Pure Energy last traded price of A$5.28. The Australia group’s shares are in a trading halt.

The British group said its cash offer was at implied premium of 19 per cent compared to Arrow’s offer, which was worth A$5.39 based on Fridays closing prices.

BG underlined its desire to secure Pure Energy after saying it had taken a 10 per cent holding in its target’s shares “from a range of shareholders”.

”BG Group’s offer gives Pure shareholders the certainty of cash at a time of heightened uncertainty in world equity and financial markets,” BG said.

Analysts said Arrow may take profits on its investment in Pure Energy and suggested Arrow may also become a takeover target itself.

Its offer for Pure Energy is conditional on approval from Australia’s Foreign Investment Review Board and minimum acceptance of 50.1 per cent.

EDITOR’S CHOICE

‘Resource nationalism’ on the wane, says BG – Feb-05

Copyright The Financial Times Limited 2009

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