PetroChina, Shell $3b Arrow bid 'fair'

Updated: 2010-06-03 13:14
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A PetroChina Co and Royal Dutch Shell Plc bid to buy Arrow Energy Ltd for A$3.5 billion ($3 billion) is fair as the offer is as much as 17 percent higher than what the shares are worth, Deloitte Touche Tohmatsu said.

The acquisition is in the best interests of the Australian coal-seam gas company's shareholders, according to Deloitte, hired by Arrow's board to evaluate the deal.

Shell and PetroChina agreed in March to buy Arrow Energy's Australian operations for A$4.70 a share in cash. The business is worth between A$4 and A$4.4 a share, Deloitte said in the report, filed to the stock exchange today. Investors also get shares in a new company, Dart Energy Ltd, holding Arrow's overseas gas assets and stakes in Australian-listed companies.

Arrow rose 1.2 percent to A$4.90 at 10:45 a.m. in Sydney trading. In March, analysts valued Dart's assets at between 36 and 84 Australian cents a share. The benchmark S&P/ASX 200 Index gained 1 percent.

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Australia's planned 40 percent tax on resource project profits starting in 2012 is likely to reduce the value of Arrow shares, Deloitte said. The report didn't include the impact of the tax because of uncertainty surrounding the proposal, the firm said.

Shell and PetroChina are paying less for reserves than similar deals in Australia, analysts including Wilson HTM Investment Group's John Young said in March. Even so, the offer, which the oil companies increased from A$4.45 a share, represents a significant premium to the company's price prior to the announcement, Deloitte said.

The deal will give Shell access to Arrow's holdings of coal-seam gas reserves to support a proposed Curtis Island LNG project, one of more than a dozen in Australia aimed at tapping rising Asian demand for cleaner-burning fuels.