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Allens, Corrs in AGL’s Queensland Gas investment

Allens, Corrs in AGL’s Queensland Gas investment

CORRS CHAMBERS WESTGARTH and Allens Arthur Robinson acted in AGL Energy Limited’s acquisition of almost a third of Queensland Gas Company (QGC) for $326.9 million by AGL Energy Limited.The deal…

CORRS CHAMBERS WESTGARTH and Allens Arthur Robinson acted in AGL Energy Limited’s acquisition of almost a third of Queensland Gas Company (QGC) for $326.9 million by AGL Energy Limited.

The deal was finalised last month after QGC shareholders voted to accept the company board recommendation to take an increased offer of $1.60 a share for 27.5 per cent of the shares.

Allens, led by partner Guy Alexander, acted for AGL. Corrs’ lawyers on the deal included joint lead partners Andrew Lumsden and Teresa Handicott.

The approval of the AGL investment overruled one takeover offer that was rejected by the board, and another was ruled out earlier by the Australian Competition and Consumer Commission (ACCC).

Santos was the first to bid for 100 per cent of QGC shares at an initial offer price of $1.26 a share in October, a bid it later increased to an “implied” value of $1.80 per share. However, the ACCC declined to approve the offer on 20 February and Santos withdrew it the following day.

Just prior to a general meeting of shareholders on 2 March to vote on AGL’s bid, Trust Company of the West (TCW) increased an offer it had made earlier for QGC to $1.51 a share. After AGL then increased its offer to $1.60, the QGC board rejected TCW’s bid and shareholders voted for QGC’s improved offer.

QGC general counsel Peter Jans said the number of bidders and counter bids involved in the transaction made the last six months an extremely busy one for him, with his email folder related to the deal taking up about eight gigabytes of memory.

“We were under almost constant takeover threat, which started with an announced bid on 5 October by Santos,” he said, which the QGC board rejected on the basis that it was a “gross undervaluation of the company’s assets”.

“It was an extremely hostile takeover bid, but having said that, all’s fair in love and takeovers, and throughout we maintained a good working relationship with Santos and still do.” McCullough Robertson acted for QGC on this matter, including lead partners Brett Heading and Derek Pocock.

“Stepping through the bidders statement and the target statement and all that goes with it, in particular things like profit forecasting and reserve certification issues, was a legal minefield,” Jans said.

“We were under attack in the takeovers panel and indeed in the media throughout this whole process to justify the rejection by the board of the Santos bid and were also under pressure to appoint an independent expert, with a view on the part of Santos to set the price — in other words, ‘We’ve made the bid, now you have got to prepare yourselves for sale’ — and we resisted that.”

While they were dealing with this bid, QGC was looking for alternative sources of investment as part of their takeover defence, and approached AGL Energy Ltd. On 4 December QGC forged an agreement with AGL for it to take 27.5 per cent, capped at 30 per cent, at $1.44 a share.

The key aspect of the deal for QGC was an agreement by AGL to distribute QGC’s gas output for 20 years from 2008, as well as allowing QGC to use unutilised pipeline capacity to transport gas sold to suppliers other than AGL for three years.

“[It is] an enormously important contract,” Jans said. “It was less than one week from the ‘Good morning, how are you?’ to the date on which we executed and announced the transaction. It was 24/7 for the whole deal.

“That transaction was highly complex because of the marriage of these various commercial interests — a significant placement of shares, the gas sale agreement itself, [and] the innovative agreement between us and AGL enabling us to use unutilised pipeline resources.”

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Allens, Corrs in AGL’s Queensland Gas investment
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