Pure Energy Shares Jump After Arrow Increases Offer

By Angela Macdonald-Smith

Feb. 12 (Bloomberg) -- Pure Energy Resources Ltd., an Australian coal-seam gas explorer, jumped as much as 10 percent to a record in Sydney after Arrow Energy Ltd. raised its offer to A$891 million ($582 million), topping a bid from BG Group Plc.

Pure gained as much as 68 cents to A$7.40 on the Australian stock exchange, rising beyond Brisbane-based Arrow’s increased cash and stock offer of A$7.16 a share, based on yesterday’s closing price. Arrow, the Australian partner in coal-seam gas of Royal Dutch Shell Plc, which competes against BG in liquefied natural gas supply, fell as much as 3.8 percent to A$2.55.

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.

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

BG, the U.K.’s third-biggest gas company, said earlier today it 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 today 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 10 percent of Arrow, said earlier this week it will announce its intentions for its stake “in due course.”

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

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