BG fends off Arrow by upping its Pure offer to A$995m

BG Group has upped its offer for Pure Energy Resources to A$995m (£445m) in an attempt to fend off sweetened proposals from its rival Arrow Energy.

The burgeoning bidding war is the latest round of jostling for access to Australia’s coal seam gas , to be turned into liquefied natural gas (LNG) to be sold into the Asian market.

BG’s latest move raises its proposal to A$8 per share, against the cash and share offer equivalent to A$7.29 from Arrow – the joint venture partner of Royal Dutch Shell, which bought 30 per cent of the Australian group’s coal seam assets last year.

BG is pushing hard, emphasising its offer is unconditional and has the approval of Australia’s Foreign Investment Review Board. But the Pure board is still considering its options and has advised shareholders not to act yet.

Arrow, which BG has already forced to raise its price once before, may yet step in with a higher offer. But the company was non-committal yesterday. Nick Davies, the Arrow chief executive, said: “We believe Arrow’s offer continues to be excellent value for Pure shareholders. The [stock] component provides significant upside.”

BG Group says it does not need Pure to justify its planned investments in LNG, but that the deal makes sense because Pure’s reserves lie alongside those of Queensland Gas Company (QGC), bought by BG for A$5.2bn in October. The QGC deal, which includes plans for an LNG plant at Gladstone on the Queensland coast, was BG’s second attempt to break into Australia’s coal seam gas market. An earlier hostile approach to Origin Energy foundered when ConocoPhillips, the US group, stepped in with a joint venture proposal worth almost twice BG’s price. Not to be deterred, BG had tied the knot with QGC within weeks, at a far lower price than the Conoco deal.

The international land grab of coal-bed methane assets started in February last year when BG took its first 10 per cent stake in QGC. Since then Shell, Petronas and Conoco have all bought into the market, and continue to vie for opportunities to expand their reserves. The majors also all have their eyes on Gladstone. Shell announced plans for a plant there last week, adding its proposals to those already tabled by BG, by Australia’s Santos in conjunction with Petronas, and by Conoco and Origin.