The offer of two QGC shares for one SGL share gives worried Sydney Gas shareholders a way out of the current crisis enveloping the company.

Sydney Gas's share price has plummeted in recent months with investors losing confidence as a string of controversies were followed by infighting. This culiminated in the resignation of the entire board last month, led by its chairman, former Olympics minister Michael Knight, after a fight with a group of influential dissident shareholders.

That clique of investors had opposed a $93 million deal with AGL that Knight organised last year to save the company from administration, arguing that it had undervalued Sydney Gas.

While the management team has been replaced, the agreement giving AGL half of Sydney Gas's Camden CBM project is still valid.

Sydney Gas is stil in trouble as it cannot secure funding to repay $30 million worth of convertible notes due to be redeemed this year. This leaves the way open for AGL to take over the company.

QGC announced a $32 million capital raising on Friday to enable it to fund the takeover and allow Sydney Gas to repay the convertible notes.

QGC’s hostile bid for the Sydney Gas is contingent only on the offer being accepted for more than 50% of shares. So even if the group of shareholders who forced the resignation of the previous board do not accept the bid, QGC can still assume control.

This shareholder group – which includes the miner Peter "Talky" Newton, Malaysian-born businessman Lee Ming Tee, Alan Bond's former chauffeur Jim Byrnes, and 1980s Perth high-flyer Yosse Goldberg – is believed to control more than 25% of the shares.

QGC is now Australia’s largest specialist CBM company and its shares have doubled in the past year. QGC closed 0.5c higher at 72c on Friday. Sydney Gas shares have fallen 70% in the past year. SGL closed 0.5c lower at 27.5c. The bid was lodged after the close of markets.

QGC managing director Richard Cottee said the move had “strong strategic rationale.” It would also ensure the merged group’s position as Australia’s leading independent coalbed methane firm, with over 360 petajoules in 2P (proved and probable) reserves.

“We’ve always considered SGL’s assets to be of high potential,” Cottee said.

“They would be an excellent fit with QGC in terms of size, market, geographic and customer diversification.”

Cottee blamed management instability for stopping Sydney Gas’s assets reaching full potential.

“SGL’s future is uncertain and problematic, with an unproven management team and a near term requirement to fund a $30 million convertible notes repayment,” he said.

“We are confident with our management expertise, QCG can unlock the value of the SGL assets to the benefit of our existing shareholders, as well as SGL shareholders.”

Sydney Gas told the ASX in a statement that its Board was considering QGC's proposal and would review the offer documents when received.

"SGL's board will keep shareholders informed of further developments and will ultimately provide shareholders with a formal recommendation on whether to accept or reject QGC's takeover offer," the company said.