Just two months ago, Arrow Energy and CH4 wrapped up their own merger to become Australia’s largest CSM company.

Santos told the Australian Stock Exchange this morning that its $1.26 per share offer represented a 24% premium to QGC’s closing share price of $1.02 on Tuesday.

It also represents a 47% premium to the volume weighted average price of 86c over the last three months.

At 11.30 EST this morning, QGC shares were trading up at $1.09.

Santos, which is making the bid through its wholly-owned subsidiary Santos CSG, currently owns 3.9% of QGC shares, including 1.9 million shares bought on-market yesterday.

Santos managing director John Ellice-Flint said the acquisition of QGC was a logical transaction and consistent with its strategy to grow its core eastern Australia gas business.

“QGC’s coal seam gas assets are a good strategic fit with our existing gas processing and transmission hubs in Queensland,” he said.

“Coal seam gas is a sector that Santos knows well and in which we are a proven developer and operator, given our ownership of the Fairview and Scotia fields.”

In January, QGC launched its own unsolicited takeover bid for fellow CSM producer Sydney Gas. But after four months of hostile exchanges, QGC withdrew the offer saying it no longer considered the company a "value proposition."

Based on QGC’s 422.7 PJ of certified proven plus probable (2P) coal seam gas reserves, Santos' offer implies a reserve valuation of $1.38 per Gigajoule, significantly higher than recent comparable coal seam gas transactions, according to Santos.

Santos’ offer is subject to certain conditions, which include acquiring a minimum 50.1% shareholding. It intends to fund the transaction via a debt facility.

A bidder’s statement will be lodged with the Australian Securities and Investments Commission (ASIC) next week.