BG Group Falls After Saying ‘Considering Position’ on Pure Bid

By Guy Collins and Angela Macdonald-Smith

Feb. 12 (Bloomberg) -- BG Group Plc fell in London trading after saying it is weighing its next move in a bid battle for Pure Energy Resources Ltd. and advised Pure shareholders to take no action on a competing offer from Arrow Energy Ltd.

BG fell as much as 19 pence, or 1.8 percent, to 1,026 pence and traded 0.3 percent lower at 1,042 pence at 8:57 a.m. London time. Pure, the Australian coal-seam gas explorer, jumped 9.4 percent to a record close in Sydney trading after Arrow raised its offer yesterday, topping a bid Feb. 9 from BG.

Shell, Arrow and BG are among companies seeking more coal- seam gas reserves to feed planned LNG projects in Queensland state. Australia’s industry to extract gas from coal seams attracted more than A$17 billion in investment last year as producers such as ConocoPhillips and Petroliam Nasional Bhd. tapped into ventures that may meet Asian demand for cleaner fuel.

“BG could afford to pay a bit more,” said Mark Greenwood, an energy analyst at JPMorgan Chase & Co. in Sydney. “I wouldn’t be surprised to see them come back with a higher offer, or match Arrow’s offer all in cash. The Pure acreage looks to be very good quality.”

Pure gained 63 cents to A$7.35 on the Australian stock exchange, rising beyond Brisbane-based Arrow’s increased cash and stock offer of A$6.97 a share, based on today’s close. Arrow, the Australian partner in coal-seam gas of Royal Dutch Shell Plc, fell 4.5 percent to A$2.53, reducing the value of its bid to A$867 million ($567 million), from A$891 million yesterday.

BG, the U.K.’s third-biggest gas company, said today it is “considering its position” and will advise the market by Feb. 18 whether it will raise its own all-cash bid. Pure shareholders should take no action on Arrow’s offer before then, the Reading, England-based company said in a statement to the exchange.

Condition Dropped

Arrow late yesterday boosted its offer by 21 percent to A$3.00 in cash and 1.57 shares for every share in Brisbane-based Pure. The target’s independent directors and two major shareholders, Tom Fontaine and Karle Meade, intend to accept the revised offer, subject to there being no higher bid, Pure said.

Arrow also dropped a 90 percent minimum acceptance condition. Shell, which owns about 11 percent of Arrow, said today in a statement it is studying the offers and will announce its intentions for its stake “in due course.”

The stock component of Arrow’s bid is “extremely Valuable” for shareholders that want to retain a direct connection to the “enormous potential” of the coal-seam gas industry in Queensland, Nick Davies, chief executive officer of Arrow, said on a conference call. Buying Pure would help underpin Arrow’s plans to supply gas for LNG ventures planned by Liquefied Natural Gas Ltd. and Shell, he said.

Arrow expects Shell to agree to sell its Pure shares to Arrow, given it had earlier agreed to sell the stake at a lower price, subject to there being no higher offer, Davies said.

BG’s hostile offer is conditional on 50.1 percent minimum acceptances and approval by the Foreign Investment Review Board.

Shell said separately today it’s studying a site in Queensland for a potential LNG project that would be supplied with coal-seam gas from licenses jointly owned with Arrow.

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