BG Ups Bid for Pure Energy by 25%, Trumps Arrow

Britain's BG Group has raised its bid for coal seam gas firm Pure Energy by 25 percent to A$995 million (US$646.1 million), trumping a rival bid by Arrow Energy and setting the stage for a bidding war.

Arrow and BG are fighting for Pure's coal seam gas reserves, which both companies would like to use to supply liquefied natural gas (LNG) export projects they plan in Australia's eastern state of Queensland.

BG said the offer of A$8 per share was unconditional and was significantly superior to the improved offer by Pure announced by Arrow on Feb. 11.

Arrow last week sweetened its bid for Pure, first launched in December, after BG's surprise rival bid. Arrow's improved bid comprised A$3 cash and 1.57 Arrow shares for every Pure share, which has an implied value of A$7.21 at the close of trade on Monday.

BG said Arrow's cash-and-scrip offer was risky as it relies on a third party to commercialize its coal seam gas and that Arrow might not be able to commercialize its gas reserves should the proposed liquefied natural gas (LNG) project not proceed or was delayed.

But with Anglo-Dutch oil major Shell having announced last week that it was also considering building an LNG processing plant using coal seam gas on the east coast of Australia, analysts have said that Shell could enter the scene and turn the takeover tussle into a battle between
the two majors.

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Shell declined to comment on any possible bid for Pure Energy when asked at an industry conference in London on Monday.

Global energy majors are targeting coal seam gas, which is found in underground coal deposits, as a new feedstock for LNG plants, which freeze the gas to liquid for export in ships.

Demand for LNG is forecast to more than double by 2020 amid an increase in energy consumption and demand for cleaner burning fuels.

BG has a 9.7 percent stake in Pure, while Arrow holds 19.9 percent and Shell owns 11.2 percent.

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