“The offer is opportunistically timed [and] priced as it does not offer a premium to the Sydney Gas share price prior to last December’s board and management changes,” the target statement said.

“Sydney Gas has significant strategic advantages in the NSW market. Sydney Gas would contribute more gas under contract to the combined entity than QGC’s offer price gives in return. Sydney Gas’ strategic importance to QGC is not recognised in its offer.”

The board claimed that Sydney Gas had a “three-step plan” intended to deliver growth and the QGC offer was timed to occur before this plan could be implemented and delivered to shareholders.

It also said the offer was highly conditional, and sought to prevent Sydney Gas from conducting certain appropriate and normal course-of-business actions. Being a share offer, it also suffered from risks associated with QGC’s business, including potentially costly water treatment and disposal issues.

The target statement argued that QGC was not yet producing commercial quantities of gas and therefore had no production or revenue history. It faced stronger competition in the Queensland market than Sydney Gas did in NSW, and Queensland gas prices were generally lower than gas prices received by Sydney Gas.

QGC also had substantial capitalised costs of about $64 million for exploration and development, some parts of which will need to be amortised once production started and this would adversely impact upon reported profits.

“QGC’s offer is opportunistic and designed to advance its interests against the interests of Sydney Gas shareholders,” Sydney Gas chairman Ray Schoer said.

“Sydney Gas has succeeded in developing an important coal seam gas business in the Sydney region with its joint venture partner, AGL, which is Australia’s largest gas retailer.

“This is a business QGC has stated is attractive and it wants to acquire as part of its growth strategy for the benefit of its own shareholders. Sydney Gas does not need QGC and QGC should not be able to obtain the benefits it seeks without properly compensating Sydney Gas shareholders.”

Schoer said that in contrast to QGC, Sydney Gas had been producing gas for four years, was enjoying growing revenues and had achieved a record month of production in March.

The company has also announced a recapitalisation plan, backed by major energy and infrastructure investor Babcock & Brown, to raise up to $50 million to secure its financial future, which would go before shareholders soon.

“Shareholders should note that under the QGC offer conditions, any shareholder accepting the offer would be prevented from voting on Sydney Gas’s recapitalisation plan or dealing with their shares in any way, even while the QGC proposal remains conditional,” the board said.