But the Sydney Gas board has urged shareholders to take no action in response to the bid.

“SGL will consider the lengthy statement and issue a response in due course,” Sydney Gas said in a statement.

“In the meantime, SGL shareholders should take no action in relation to the offer.”

The statement went on to say that the QGC offer was “opportunistic and highly conditional” and QGC had made no secret of Sydney Gas’ high strategic value to the Brisbane-based company’s growth strategy.

In addition, because the consideration consisted of a share swap (two SGL shares for one QGC with a condition that QGC secures acceptances for more than 50% of the SGL shares on issue) the implied value of the offer was uncertain and subject to change.

The QGC bidder’s statement was lodged with the Australian Securities and Investments Commission (ASIC) and the Australian Stock Exchange (ASX), and provided to SGL.

QGC managing director Richard Cottee said the offer was an opportunity for Sydney Gas shareholders to turn around their investments by merging them with QGC which was a proven performer in the development of coal seam methane.

“SGL shareholders will be able to continue their exposure to the coal seam gas industry but as part of a company with the technical expertise and management skill to deliver high returns that SGL shareholders have missed-out on for some years”, Cottee said.

QGC chairman Bob Bryan said a combination of QGC and SGL would create an entity with the size and geographic positioning to compete effectively in a rapidly changing market.

“The combined entity would have coal seam gas reserves in both the Surat and Sydney Basins – at both ends of the Queensland/New South Wales electricity interconnector. It would be strategically placed to benefit from gas/electricity arbitrage between the states”, Bryan said.

“SGL shareholders will get an attractive price and continue to share the benefits of developing coal seam gas while overcoming the long history of corporate problems that have inhibited the development of Sydney Gas and returns to shareholders.”

The bidder’s statement also argued that: SGL shareholders would benefit from increased operational diversity and lower overall risk and from QGC's proven expertise in CSM. They would also receive a substantial premium for their SGL shares, based on the current values of the two companies.

If the relevant conditions were satisfied, Sydney Gas would obtain a low-cost financing solution for its A$30 million worth of convertible notes which are due to be repaid to Australian Gas Light by April and June. Failure to repay the notes could see AGL take Sydney Gas’ 50% share of the Camden gas project.