Australia's Arrow Energy is set to reject a $3 billion joint bid from Royal Dutch Shell and PetroChina because the offer price is too low, the Australian Financial Review said on Monday. The paper said in an unsourced report that Shell and PetroChina want to scrap Arrow's proposed Fisherman's Landing liquefied natural gas project in Queensland state and divert the firm's sizeable gas reserves into Shell's larger planned LNG facility nearby. An Arrow spokesman said the firm does not comment on media speculation and added that discussions are continuing.
On March 9, Shell and PetroChina offered A$4.45 in cash for each Arrow share, plus a share in a new Arrow entity, in a first foray for a Chinese company in Australia's burgeoning coal-seam gas sector. Arrow is now weighing whether it can deliver better returns to shareholders by pursuing its own LNG plans, the paper said. Negotiations are expected to be complicated by the valuation of the target's international business, analysts said, as they share a widely differing valuation on Arrow's offshore business, ranging from 15 cents to 74 cents a share.
Given that Shell already owns a 30 percent stake in Arrow's domestic gas assets and that it has partnered a major Chinese buyer for the bid, analysts at Macquarie and J.P Morgan have said that it was unlikely for a white knight to emerge. Separately, Australia's Liquefied National Gas Ltd (LNG.AX) said it plans to update the market on Monday or Tuesday on the proposed sale of the Fisherman's Landing LNG project to Arrow and put its shares on a trading halt pending the announcement.
LNG Ltd agreed last month to sell its stake in the Fisherman Landing project to partner Arrow, which would allow Arrow to gain full ownership of the development. Arrow's board earlier this month recommended shareholders take no action on the offer, which is non-binding and conditional, and appointed Citi and UBS as financial advisers to evaluate the deal.