If we think about it, BG Group of Britain has timed its bid for Queensland Gas very nicely.
According to Bloomberg, the BG offer values QGC at $A5.2 billion or $US3.1 billion in buying the shares in the target it doesn’t already control.
BG already holds 9.9% of QGC, picked up in its first move into the company some time ago.
It will pay $A5.75 a share in cash, 80% more than the last closing price of $A3.20 for QGC.
With the Australian dollar trading around 60 USc, the deal is a steal for BG.
Imagine what the cost would have been to get the same price in Australian dollars if the currency had been trading around 90 USc, as it was earlier this year when it started its unsuccessful assault on Origin Energy.
The US dollar price at that level would have had to been over $US5.10, compared to $US3.45 at the current exchange rate, a big, big saving.
With the extra leeway from the weaker Australian dollar, BG has been able to maintain the illusion of being generous, for no real added financial pain for itself.
QGC shares jumped by more than 79% this morning to trade at $5.75.
The bid is agreed to and in the current market climate (and with oil prices tanking) there’s no danger of BG being overbid, or beaten by another player for an alliance with its target, as it was with Origin.
BG last month failed in a $A13.5 billion offer for Origin after Origin drew interest and then a huge joint venture with US major, ConocoPhillips, covering Origin’s coal seam gas reserves in Queensland.
Besides its direct equity stake, BG has already built up a 20% interest in some of QGC’s assets (as per an earlier agreement at the time of the equity stake being taken).
BG has agreed to buy the shares held by QGC’s two biggest institutional investors, ANZ Infrastructure Services Pty and Sentient Group, as well as shares owned by its chairman and managing director, giving it a 17.1% stake.
AGL Energy Queensland Gas’s biggest shareholder, said it intends to sell its 22% stake for $A1.18 billion in the absence of a higher offer, which will give BG a dominant 39% stake.
AGL picked up an original 29% stake in QGC a couple of years ago as the Queensland company fought off a bid from Santos. QGC has watered that holding down by the BG Group deal and is issuing shares in a couple of takeovers for smaller players, Roma Petroleum and Sunshine Gas.
BG and Queensland Gas have been examining plans to build an $A8 billion LNG project near Gladstone on the Central Queensland coast
AGL Energy will get the cash and get access to gas reserves as part of the agreement to sell its stake to BG. That’s why it did the deal with QGC in the first place after it bought a Queensland Government gas retail and distribution business based in Brisbane.
AGL says it will have the right to buy 1.07 petajoules of proven, probable and possible gas reserves, in addition to exploration acreage and it also gains the right to buy the gas-fired Condamine power station in Queensland and a related 10 petajoules-a-year gas supply contract.
Gladstone is shaping up as a major export gas hub with Santos/Petronas and Origin/Conoco and Arrow/Shell all looking to locate plants in or around the city, as well as BG and QGC’s proposed plant.
