Australian Worldwide is considering buying its smaller rival for $500 million, the Sydney Morning Herald newspaper reported.

The companies are discussing a cash and stock valued at A$1.58 for each Arc Energy share, creating a company with a market value of more than A$2 billion, the Sydney Morning Herald reported.

Virgin shares fall as Toll pulls plug on share sell off

Virgin Blue plunged 22% to a record low after its controlling shareholder Toll Holdings Ltd decided not to sell its stake on lack of investors’ interest.

Virgin Blue last week slashed its net income forecast to less than $140 million for the year ending in June 30, down from $216 million a year earlier.