“The hedge funds that got in will all jump out again” if the A$3.3 billion ($3 billion) bid is unsuccessful, Nick Raffan, a Fat Prophets analyst in Sydney, said by telephone today. “Hedge funds provide an opportune time to lock in profit.”

Brisbane-based Arrow surged to A$5.11 from A$3.48 after the energy explorer said March 8 that Shell and PetroChina had offered A$4.45 a share for its Australian business. Shareholders would also get stock in a new company comprising its international assets, Arrow said.

The shares traded at A$5.06 at 11:05 a.m. in Sydney, up 0.6 percent, compared with a gain of 0.3 percent for the S&P/ASX 200 Index. That’s 45 percent higher than the March 5 closing price.

There is no guarantee the Foreign Investment Review Board would approve the acquisition, Raffan said. The proposal also hinges on support from Arrow’s largest shareholder, New Hope Corp., which owns almost 17 percent, he said. Arrow would face “major hurdles” in advancing with the Fisherman’s Landing gas project in Queensland, especially finding more than A$2 billion in necessary financing, Raffan said.

BHP Billiton Ltd. and Woodside Petroleum Ltd., Australia’s largest oil and gas producers, may deliver stronger performances this year in Sydney trading, he said.

“People who have been in the stock a long time have made a monster profit,” said Raffan, who downgraded Arrow Energy in a report today to “sell” from “hold.” “Do you take that now and invest it, say in Woodside or BHP, to take advantage of the global recovery that’s under way, or do you risk it?”

To contact the reporter on this story: James Paton in Sydney jpaton4@bloomberg.net.
 

Source: http://www.bloomberg.com/Sell_Arrow_Energy_after_45%