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BG Raises Bid for Pure Energy

THE WALL STREET JOURNAL

MARCH 1, 2009, 6:31 P.M. ET

By ROSS KELLY

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 winning step in its battle with Royal Dutch Shell PLC’s Australian joint-venture partner, Arrow Energy Ltd., for the coal-seam gas producer.

U.K.-based BG increased its offer to 8.25 Australian dollars (US$5.28) 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 already had trumped an offer by Arrow Energy of A$3 cash plus 1.57 of its shares for each Pure share.

Pure, which already had 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 about two weeks since BG launched its A$8 per share cash offer, and investors had started to become 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 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 as many as 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 agreed to provide CSG to a smaller LNG plant to be built by LNG Ltd. A final investment decision on that plant is expected late this year or in early 2010.

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

BG and Arrow have indicated they won’t need to acquire Pure to have enough gas to feed their planned LNG sites. Analysts, however, have speculated BG is bidding for Pure to disrupt 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]

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