SYDNEY -(Dow Jones)- Arrow Energy Ltd. (AOE.AU) said Monday that it would be “quite difficult” for Royal Dutch Shell PLC (RDSB.LN) and PetroChina Corp. (PTR)to change the value of their proposed A$3.44 billion takeover offer for the bulkof its Australian assets in light of Australia’s proposed new resources tax.
Arrow, however, couldn’t categorically rule out a change to the bid’s termsand said it hasn’t talked to Shell specifically about the tax and its potentialimpact on the deal.
Shell and PetroChina’s offer of A$4.70 cash per Arrow share was launchedbefore Australia on May 2 announced that it intends to impose a 40% tax ononshore resource company’s profits that exceed the long-term bond rate,currently at around 5.4%.
Investors are concerned that Shell and PetroChina may lower the value of theirbid in response to the tax announcement, similar to the way that Peabody EnergyCorp. (BTU) reduced the value of its bid for Macarthur Coal Ltd. (MCC.AU).
Arrow said Monday that the deal is on track in its current form, with therelated scheme documents released to shareholders after receiving court approvaland a shareholder vote on the offer still expected to occur next month.
Still, Chief Executive Shaun Scott is reluctant to rule out Shell andPetroChina lowering their bid.
“We haven’t had any specific discussions with them about it, and clearly thereis just so much uncertainty about what (the tax) is going to look like,” Scotttold reporters on a conference call.
“The only thing we know with any certainty is that (the tax) is going to bequite different to what was announced initially. So on that basis, it’s clearlygoing to be quite difficult for them, if they wanted to, I guess use any of theprovisions that exist underneath our scheme implementation agreement,” he said.
“And clearly now that we’ve been before the court to get all of thesedocuments approved and ready to release to shareholders, there’s certainundertakings that were made through that process.”
“But as I say, this is obviously something that everyone in the resourcessector is considering very carefully and looking at how it’s going to impact ontheir business, and I’m sure that Shell are no different.”
In its scheme booklet, posted on the Australian Securities Exchange, Arrowsaid its shareholders are still expected to vote on the A$4.70 per share cashoffer on July 14, with a related court ruling expected July 29 and the last dayof trading in Arrow shares expected July 30.
Shell Upstream International Executive Vice President of Australia, AnnPickard, said last month that Shell and PetroChina didn’t model any potentialnew tax into their offer for Arrow, despite much market and media speculationforeshadowing the tax’s introduction. Pickard declined to comment on whether thebid will be changed.
“I do hope it succeeds,” she told reporters at an energy industry gathering onMay 17.
“Obviously, as you can hear from the other companies planning the LNG (liquefied natural gas) projects, the tax is a challenge to it,” she said. Shelland PetroChina intend to use Arrow’s gas reserves to supply an LNG project atGladstone, Queensland.
If Shell doesn’t go ahead with the bid for Arrow, it would be left without agas supply for its LNG plans and Arrow is the last large independent coal seamgas company left in Queensland.
Shell, like other companies, is currently engaged in consultation with thegovernment about the tax, and Pickard said that the outcome of the negotiationswill obviously help it assess how much the tax will impact its business.
An independent expert has deemed Shell and PetroChina’s bid fair andreasonable, saying their A$4.70 cash offer is above its assessed fair marketvalue of Arrow shares of between A$4.00 and A$4.40. The assessment, however,didn’t include assumptions about the impact of any tax changes.
If the deal succeeds, shareholders in Arrow will get a share in a new businesscontaining its offshore assets, to be listed separately as Dart Energy Ltd.
CLSA energy analyst Di Brookman said May 5 that she doesn’t think the value ofthe bid will be changed because any impact from the tax will be ameliorated bythe discount at which the bid was made compared to earlier takeovers inQueensland’s coal seam gas sector.
At 0330 GMT, Arrow shares were down 4 cents, or 0.8%, at A$4.81, while thebenchmark S&P/ASX 200 index was down 3.1%.
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This post was written by admin on June 11, 2010
