Sunshine Gas Shares Jump After Queensland Gas Offer

By Angela Macdonald-Smith

Aug. 21 (Bloomberg) -- Sunshine Gas Ltd. rose the most in almost seven months in Sydney trading after agreeing a takeover offer from Queensland Gas Co. valuing it at a minimum of A$837 million ($731 million) based on the shares' previous close.

Brisbane-based Sunshine advanced as much as 59 cents, or 27 percent, to A$2.79. Queensland Gas, a larger producer of coal- seam gas also based in Brisbane, fell as much as 9 percent to A$3.93, lowering the value of the takeover offer, in which shareholders can accept either all in stock or a mix of stock and cash.

Queensland state, Australia's third-biggest fuel-consuming region, will be the major contributor to demand growth and is set to become the country's biggest energy user by 2012, the government's commodities forecaster said in December. Queensland Gas said yesterday it will primarily use Sunshine's reserves to meet local demand, and to bolster a planned gas export project.

``Like many acquisitions in the coal-seam methane space this acquisition appears expensive on the visibility we have now,'' JPMorgan Chase & Co. said in an Aug. 20 report. ``QGC has made a grab for acreage based on its bullish view of domestic gas prices. We are less optimistic on domestic gas prices given the abundance of coal-seam methane resources.''

Credit Suisse Group, in contrast, said it believes the offer undervalues Sunshine Gas by about 13 percent.

``We think this is a very good deal for QGC shareholders while undervaluing the upside potential within the Sunshine Gas asset base,'' Credit Suisse said today in a separate report.

Coal-seam gas, mostly comprising methane, bonds as a thin film on the surface of coal and is released when pressure is reduced, usually after water is removed.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net