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BG Raises Leading Bid for Pure Energy

THE WALL STREET JOURNAL

FEBRUARY 27, 2009

SYDNEY–BG Group PLC sweetened its cash bid for Pure Energy Resources Ltd. despite already having the highest offer on the table.

BG likely hopes the move is a knockout punch in its battle with Royal Dutch Shell’s Australian joint venture partner, Arrow Energy Ltd., for the coal seam gas producer.

U.K.-based BG increased its offer to A$8.25 cash for each Pure share, valuing the company at A$1.03 billion, above its previous cash offer of A$8 a share. The previous offer had already trumped an offer by Arrow Energy of A$3 cash plus 1.57 of its shares for each Pure share.

Pure, which had already endorsed BG’s previous bid, recommended that its shareholders accept the sweetened offer.

An Arrow spokesman said Friday that the company was still considering its options. The company had said the day before that it wouldn’t rule out increasing its offer for Pure.

It has been 10 days since BG launched its A$8 per share cash offer and investors were already becoming increasingly doubtful that Arrow would raise its offer.

Pure shares fell two cents Friday to A$8.13, which is lower than BG’s latest bid, indicating investors believe the bidding war is over.

Matters are complicated by the fact that Arrow already owns about 20% of Pure and Shell owns 11%. BG has built up a 29% stake.

“With those shareholder blocks there, irrespective of what happens from here, there will have to be some discussions between shareholders as to how we proceed,” Arrow’s chief executive, Nick Davies, said Thursday.

Arrow, with Shell, is competing against BG and others for Australia’s coal seam gas reserves ahead of the planned construction of up to five liquefied natural gas processing plants at Gladstone in Queensland state.

Arrow sold 30% of its CSG reserves to Shell last year and the two have already agreed to provide CSG to a smaller-scale LNG plant to be built by LNG Ltd. A final investment decision on that plant is expected late this year or early 2010.

Shell has it own LNG plans, announcing in February that it is studying the feasibility of building an LNG processing facility at Gladstone to be fed by Arrow’s reserves.

Both BG and Arrow have indicated they don’t need to acquire Pure to support their LNG aspirations, with some analysts speculating that BG is only bidding for Pure to spoil Shell’s plans.

Pure, however, is considered valuable for its well-developed CSG reserves and their close geographic proximity to Gladstone.

Write to Ross Kelly at [email protected]

WSJ Article

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