Tap offered a one for four share offer which valued Arc's shares at between 36 and 40 cents per share. PriceWaterhouseCoopers, who prepared the independent experts' report, said their preferred value of Arc shares was 55 cents.

The report said the offer was neither fair nor reasonable and Arc directors would be justified in recommending that shareholders reject the offer.

Tap directors also said that shareholders were unlikely to get Capital Gains Relief if they accepted the offer as more than 20% of the shareholders had already indicated that they were not going to accept the offer.

EnergyReview.net revealed the CGT exposure late last week, after Hardman decided to exercise their option to take 10% of Arc's issued capital and Arc directors confirmed they still controlled at least 10% of the share register.

The report reiterated Arc directors' long held view that the Tap offer would dilute shareholder's leverage to Arc's assets, especially in light of the impending appraisal and exploration program planned for the Perth Basin.

The Tap offer expires on the 29 April.