Shares in Origin Energy jumped 40% at one stage yesterday after directors supported an $A18.4 billion non-binding buyout offer from a consortium led by Canada’s Brookfield Asset Management that will see the company split the company in two if it succeeds.
The shares ended up more than 34% at $7.83 after touching a day’s high of $8.15 in response to the cash bid at $9 a share, which is the highest Origin shares have been since early 2018.
In backing the offer, Origin opened its books to the consortium for due diligence after it raised its offer to $A9 a share which was a knock out near 55% premium to Origin’s Wednesday’s close of $A5.81.
Origin is not only an electricity and gas producer distributor and retailer, but is part of a Queensland-based LNG export consortium, as well as a growing provider of power from renewables such as solar, batteries and wind.
Directors said they would recommend shareholders vote in favour of the proposal if no higher bid emerges.
“Due diligence is expected to complete within eight weeks,” Origin said in a statement to the ASX on Thursday morning. “Should Origin receive any proposals which the board considers may lead to a superior outcome for Origin shareholders, these will be evaluated.”
And if the deal is not done in seven months – by May 15 next year – the offer price will rise by 3 cents a month. That would take the price to around $9.18.
The scheme of arrangement will require 75% shareholder support and judging by yesterday’s market action, a rival doesn’t seem to be around for the moment.
The bid from Brookfield comes after it was rebuffed earlier this year when it was part of the takeover bidders (With Grok Ventures, the investment arm of Atlassian co-founder Michael Cannon-Brookes) for Australia’s top power producer, AGL Energy.
“Our confidence in Origin’s prospects underscored our engagement with the Consortium and delivered a material increase on their initial offer,” Origin Chairman Scott Perkins said in Thursday’s statement.
In its statement, Origin disclosed for the first time that this was not the first offer from the bidders.
It said it had received an initial cash offer of $A7.95 apiece in early August from the consortium, which was hiked to between $A8.70 and $A8.90 per share in mid-September.
Under the proposal revealed on Thursday, Brookfield would acquire Origin’s energy markets business, while MidOcean Energy, the other consortium partner, will take control of Origin’s integrated gas business, including its 27.5% stake in Australia Pacific LNG (APLNG) in Queensland.
MidOcean is backed by energy investor EIG which last month paid $US2.15 billion for Tokyo Gas’s stake in four Australian integrated LNG Projects.
Origin has been looking to hasten its transition to cleaner energy, accelerating the planned shut down of the country’s biggest coal-fired power plant and selling its gas exploration assets.
“Our business plan includes additional investment of A$20 billion by 2030 to build the required renewable capacity and storage and position Origin as Australia’s leading ‘greentailer’,” Brookfield’s Asia Pacific Chief Executive Officer Stewart Upson said in a statement.
Origin CEO, Frank Calabria on Thursday said the business had executed a range of important strategic initiatives in the past year that had strengthened its balance sheet, sharpened its strategic focus and “positioned the company to prosper from the energy transition”.
“We believe Origin is in a strong position to lead the energy transition, capture opportunities and create value for shareholders,”Mr Calabria said.
The deal requires Australian Competition and Consumer Commission and Foreign Investment Review Board approval.
