Under the deal, AGL will take the equity through a share placement by QGC to AGL at $1.44 per share, for a cash outlay of up to $292 million.
Last month, QGC rejected a hostile $606 million takeover bid by Santos, saying it deemed the bid opportunistic and inadequate.
The Australian Competition and Consumer Commission has launched informal inquiries into whether acquiring QGC would give Santos too much control of the Queensland gas market, but the argument is now academic and Santos must look for other options to expand its domestic gas portfolio.
In a short time, AGL has made itself a major player in CSM, taking 50% in the Mornanbah and Camden projects and now a major slice of QGC.
AGL will also secure a 540-petajoule, 20-year gas supply agreement with QGC with an additional 200PJ option, below the current average price of AGL’s wholesale gas portfolio.
As part of the agreement, QGC will undertake an off-market share buyback at $1.44/share for up to 12.5% of the enlarged share capital post-AGL share issue.
AGL said its ownership would not exceed 30% following the buyback.
The company is also entitled to appoint three out of nine directors to the QGC board.
QGC chairman Bob Bryan said the “strategic relationship” with AGL would underpin its continued development and growth as an independent energy company.
“The agreements announced today confirm QGC as a major new force in the gas supply market along Australia’s eastern seaboard, with initial focus on southeast Queensland,” Bryan said.
Managing director Richard Cottee said the new injection of funds meant QGC could further accelerate the development of its multi-option energy supply business model.
This, he said, would create “vigorous competition” in the gas supply market and maximise long-term value to QGC shareholders.
“Furthermore, AGL’s cornerstone investment and bankable gas supply agreement will also provide the funding base to further accelerate the exploration and development of QGC’s gas resources,” Cottee said.
Meanwhile, under a separate agreement, QGC said its joint venture partner Sentient Gas will convert its permit interests and its unitisation agreement, into an equivalent 10% stake in QGC, adding to a current 3% interest.
QGC said its restructure, with new major shareholders AGL and Sentient, is expected to have an implied market capitalisation in excess of $925 million.
The agreements with AGL and Sentient are subject to QGC shareholder approval at an extraordinary general meeting expected to be held in February 2007.