Mergers and Acquisitions 2009 2010

Eastern Star Gas (ESG) During a most difficult year in the stockmarket, the performance of the coal seam gas (CSG) sector was, thanks to M&A activity, nothing short of breathtaking. At the large end, BG bid unsuccessfully for Origin and successfully for Queensland Gas, while Petronas and Santos committed to a large joint venture, something former target Origin also did with US giant ConocoPhillips.

At the smaller end. both Sunshine Gas and Pure Energy were taken over, and we think another target in this range is Eastern Star. It has vast CSG reserves in Queensland and recently “welcomed” Santos on to its register after the latter bought a 20% stake from Hillgrove Resources.

Origin (ORG)/Santos (STO) At the larger end of the CSG sector, there is still a strong chance Origin and Santos will either merge their Queensland-based assets (much like is currently occurring with BHP and Rio’s iron ore holdings in Western Australia) or their entire corporate structures.

Along with the aforementioned BG, both companies are attempting to build huge CSG plants around Gladstone in Queensland to supply energy-hungry Asian customers. At present each of the three players plans to develop separately owned pieces of infrastructure, but given the many billions of dollhttp://www.australianstockwatch.com/ars this would require, at some stage the three main players will become two – or even one.

 So we look forward to a fruitful start to a booming year of Mergers and Acquisitions

Bank stocks are still in turmoil as a result of capital raisings, with the Commonwealth Bank announcing this morning that it was issuing $750 million in new shares. When trading in the bank’s shares resumed after a halt this morning, they fell 61 cents, or 2%, to $29.39.

Westpac, which came out of a halt this morning, was punished for yesterday’s $2.5 billion capital raising – its shares plunged $1.48, or 8.3%, to $16.40, taking them closer to the $16 issue price of the new shares.

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