MELBOURNE – Mitsui & Co won a three-way bidding war to take over Australia's AWE, after rival Mineral Resources failed to match the Japanese trading giant's A$594-million offer.

Assuming the deal goes ahead, it would mark Mitsui's first takeover of an Australian company and give it a 50% stake in the country's biggest onshore conventional gas find in 40 years at a time when local gas demand is soaring.

"It should be a relatively low risk investment for Mitsui with the possibility of very decent returns, given the upswing in domestic gas prices in Australia," said Tom O'Sullivan, managing director of energy consultancy Mathyos Japan in Tokyo.

AWE on Monday withdrew its support for Mineral Resources' bid and recommended shareholders accept Mitsui's all cash offer of A$0.95 a share after Mineral Resources did not match Mitsui's offer by a February 2 deadline. AWE also recommended shareholders reject a rival A$0.73 a share bid by China Energy Reserve and Chemicals Group.

"The Mitsui proposal, pitched at a significant premium to the competing offers, represented a superior value proposition," AWE chairman Ken Williams said in a statement.

Mitsui's offer, which landed last week, is 74% above AWE's share price last November before CERCG's bid was announced, 30% above CERG's bid and 14% better than Mineral Resources' offer.

"The control premium is quite substantial," said Deutsche Bank analyst John Hirjee.

Investors on Monday bet no other bidders would emerge, sending AWE's shares down 3.6% to A$0.95, in line with the offer price.

With the AWE takeover, Mitsui would become operator of a gas field for the first time, running the Waitsia gas project, a role Mitsui said would bolster its credentials to bid on other gas assets in Australia.

"Winning this attractive asset is one of our major purposes for this deal," Mitsui's investor relations head, Yuji Mano, told analysts on a quarterly earnings call on Monday.

"Since a gas shortage is expected in Western Australia after 2020, it will be a stable business."

The Japanese firm already has stakes in gas fields in eastern Australia, where it has worked closely with AWE, and also owns stakes in liquefied natural gas projects in Western Australia, as well as coal and iron ore mines.

Mitsui, being advised by Rothschild, is expected to lodge its bidder's statement on February 9, AWE said.

AWE is being advised by UBS and Highbury Partnership.