Arc issued Hardman a convertible note, exercisable at 16 cents, in September 2001 as part of a MOU between the two companies and their Perth Basin operations. Arc are now trading in the 45-48 cent range after the Tap offer, almost three times the exercise price.

Hardman directors Mr Spencer and Mr Ted Ellyard have just returned from London where they successfully listed the company on the AIM stock exchange.

"It's a deal to do," said Mr Spencer on the note conversion. "Its obvious because of the share price."

He would not be drawn on whether Hardman, which would probably emerge as Arc's biggest shareholder after the note conversion, would accept Tap's offer. "We will have to look at the bidders statement properly," Mr Spencer said.

Mr Spencer did allude to the preference for an independent Arc, saying that was the reason for the MOU in the first place.

"The reason for the convertible note in the first place was that we saw Arc as a good partner. We wouldn't have gone into the deal in the first place otherwise," he said. Hardman would end up with almost 10% of Arc's issued capital under the terms of the note.

With this being the case, and in the case of a successful Tap bid for Arc, Tap managing director, Paul Underwood, could emerge with Woodside - Hardman's biggest shareholder - on his register. With Tap's well known concern at being considered a takeover target themselves, this Woodside scenario is causing some food for thought in at least four Perth boardrooms.