BG Increases Offer for Pure as It Seeks Full Control

By Angela Macdonald-Smith

Feb. 27 (Bloomberg) -- BG Group Plc raised its offer for Pure Energy Resources Ltd. to A$1.03 billion ($667 million) and made the bid conditional on getting 90 percent of the stock as it seeks to thwart a rival offer from Arrow Energy Ltd.

The cash offer of A$8.25 a share, a 3.1 percent increase, is final in the absence of a higher bid, the U.K.’s third- biggest natural gas company said today in a statement. The move further boosts BG’s offer above the cash and stock bid by Brisbane-based Arrow, Royal Dutch Shell Plc’s Australian partner in coal-seam gas.

BG, Shell and Arrow are seeking more reserves to feed proposed liquefied natural gas projects in Queensland that may meet rising demand in north Asia for cleaner-burning fuels. Brisbane-based Pure’s independent directors and two key shareholders earlier this week accepted BG’s offer, taking its interest in the target to about 29 percent, while Arrow has 20.2 percent and Shell about 11.2 percent.

BG’s latest offer “requires everyone to come across the board” to succeed, said Andrew Williams, an oil and gas analyst at Credit Suisse Group in Melbourne. “It’s a ‘put up or shut up.’ You would only do it if you thought you had options” for other investments, he said.

Pure Energy dropped 2 Australian cents, or 0.3 percent, to A$8.13 on the Australian stock exchange, 12 cents below BG’s increased offer. Pure had been trading above all the offer prices since they were made. Arrow slipped 0.7 percent to A$2.67.

‘Crossover Point’

Brisbane-based Arrow said yesterday it was still considering “all options” on the takeover.

“At some point there is a crossover point for us between value we would get from accepting into the bid versus value that we’d get from acquiring the company,” Arrow Chief Executive Officer Nick Davies said yesterday. Neither Davies nor Shaun Scott, chief executive of Arrow’s Australian business, could be reached for comment today.

Shell yesterday reiterated that it was continuing to evaluate all offers for Pure. Pure today repeated in a separate statement that its independent directors unanimously recommend shareholders accept BG’s offer in the absence of a higher bid.

BG has no agreements with either Arrow or Shell for the sale of their shares in Pure, the Reading, England-based company said in an e-mail. Should BG not reach 90 percent acceptances by the end of the offer, due March 23, Pure shareholders that have accepted will receive A$8 a share, the earlier, unconditional bid price, it said.

Pure Triples

Pure has almost tripled in Sydney trading since Arrow made its first offer in December to gain reserves to supply an LNG plant planned in Gladstone by Liquefied Natural Gas Ltd. The bidding contest with BG underscores the allure of Australia’s coal-seam gas industry, which drew more than A$17 billion in investment last year from companies seeking to meet Asian demand for cleaner fuels.

The LNG Ltd. venture is one of five rival projects proposed for the central Queensland coast city. BG, Shell, Malaysia’s Petroliam Nasional Bhd. and ConocoPhillips are among companies planning to convert gas extracted from coal seams into LNG for export to Asia, the biggest market for the fuel.

LNG is gas chilled to liquid form for transportation by tanker to destinations not connected by pipeline.

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