"I have to say, I've never been less excited about a takeover offer than this one," one major shareholder told Fairfax Media.

"Our view is that it looks like the company has been bullied into this. Things have gotten difficult in China at the 11th hour and management have rolled in rather than dig in for a fight, they could have held out for a little longer."

He said the deal held little premium for shareholders.

Macquarie Wealth Management investor notes expressed surprise at the board's support for the offer.

"Unanimous board approval at 25 cents a share is surprising, given the Sino traded at 23.5 cents a share only 10 days ago," the Macquarie analysts said.

"We would assume the board is aware of greater risks than we and the market have modelled."

'Blindsided'

Another analyst said the offer - and Sino's support - was completely unexpected.

"While we wouldn't say there were bullied, there is clearly something strange going on," the unnamed analyst told Fairfax Media.

"This blindsided virtually everyone."

Sino has three major gas projects, the Linxing East and West gas plays and the Sanjiaobei gas project in the Shanxi province of China.

Earlier this month it won approvals from its Chinese state-owned joint venture partner, China United Coalbed Methane, which is a subsidiary of the China National Offshore Oil Corporation.

Sino is targeting a production rate of between 350 and 550 million cubic feet of gas a day by 2022, supplying the Chinese domestic market.

It has already secured a $US100 million funding facility to develop the project from Macquarie Bank.

The deal needs approval from shareholders and the Foreign Investment Review Board.

This is not the first time Lone Star has made a tilt at an Australian oil and gas company.

In 2016, Lone Star Funds made a $421 million unsolicited, fully cash takeover proposal for AWE.

Lone Star was approached for comment.

Sino's share price rose 19 per cent in early trading to reach 25 cents a share.