Bloomberg reported that PetroChina Company and Royal Dutch Shell Plc bid to buy Arrow Energy Limited for AUD 3.5 billion is fair as the offer is as much as 17% higher than what the shares are worth.

Deloitte Touche Tohmatsu said that the acquisition is in the best interests of the Australian coal seam gas company’s shareholders hired by Arrow’s board to evaluate the deal. Shell and PetroChina agreed in March to buy Arrow Energy’s Australian operations for AUD 4.70 per share in cash.

Deloitte said that the business is worth between AUD 4.00 and AUD 4.40 per share. Investors also get shares in a new company, Dart Energy Limited holding Arrow’s overseas gas assets and stakes in Australian-listed companies. Arrow rose 1.2% to AUD 4.90 at 10:45 AM in Sydney trading. In March analysts valued Dart’s assets at between 36 and 84 Australian cents a share. The benchmark S&P or ASX 200 Index gained 1%.

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

Analysts including Wilson HTM Investment Group’s Mr John Young said that Shell and PetroChina are paying less for reserves than similar deals in Australia.

Deloitte said that even so, the offer, which the oil companies increased from AUD 4.45 per share, represents a significant premium to the company’s price prior to the announcement. 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 aimed at tapping rising Asian demand for cleaner burning fuels.

(Sourced from Bloomberg)