Britain's BG Offers $538 Million for Pure Energy

British energy firm BG Group has offered A$796 million (US$538 million) for Australian coal seam gas firm Pure Energy, BG said on Monday, trumping an earlier bid by Arrow Energy.

Australia's coal seam gas sector has seen a number of multi-billion dollar deals earlier this year as global energy majors, struggling to secure access to conventional oil and gas resources, target coal seam gas as a new feedstock for liquefied natural gas plants.

BG, the UK's third-largest oil and natural gas producer, said its all-cash bid was A$6.40 a share, a 19 percent premium to the implied value of Arrow's offer of A$5.39 per share on Feb. 6.

BG said the offer was also a 115 percent premium to Pure's closing share price of A$2.98 on Dec 19, the last full day of trading before Arrow's offer was announced.

"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 in a statement.

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It said it has already acquired about 10 percent of Pure shares from a range of shareholders.

Shares in Pure Energy, currently on a trading halt, closed at A$5.28 on Friday. Arrow's shares jumped 15.3 percent to A$2.56 in the morning session.

Arrow Energy, which has a 19.9 percent stake in Pure, in December offered A$2.70 in cash plus 1.21 Arrow shares for every Pure share. Pure has previously said it would recommend the offer, subject to there being no superior proposal.

BG's bid for Pure Energy marks the firm's third acquisition foray in Australia as it attempts to boost its gas resources to feed a proposed liquefied natural gas (LNG) project on the country's east coast using coal seam gas.

BG bought its LNG joint-venture partner Queensland Gas last year after an earlier unsuccessful attempt to acquire Origin Energy.

Copyright 2009 Reuters. Click for restrictions.