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The North American consortium Brookfield/EIG is gearing up for a “full-throated” fight to convince the bulk of Origin Energy shareholders to support the $20 billion deal, which is teetering on the edge of defeat as EIG revealed Origin’s largest shareholder had talked of joining the bid it is now rejecting.
Origin Energy’s largest shareholder, AustralianSuper, had discussions with Brookfield and EIG about their $20 billion takeover of the energy giant as recently as last week, despite the super fund rejecting an early invitation to be part of the consortium.
Brookfield and EIG sweetened their “best and final” offer last week to $9.53 per share, valuing Origin at nearly $20 billion.Credit:
The latest twist in the country’s largest corporate deal comes as AustralianSuper confirmed it had increased its ownership of the power giant, building its stake to 15.03 per cent.
But the consortium has also upped the pressure on AusSuper, revealing a failed bid could lead to a plan B leaving the super fund stuck with shares in the natural gas assets it does not want while Brookfield walks away with the remaining assets.
The two North American suitors sweetened their “best and final” offer last week to $9.53 a share, valuing Origin at nearly $20 billion, a $1.2 billion boost that was swiftly rejected by AustralianSuper, which maintains the bid is still substantially below its estimate of Origin’s long-term value.
AustralianSuper confirmed on Monday it had increased its holding in the power company, picking up 21 million shares for $8.40 – compared with a bid price of $9.53 – the day after it rejected the consortium’s latest offer.
The super fund denied it was in discussions with Brookfield and EIG about joining their consortium, but the boss of global energy investor EIG, Blair Thomas, said discussions had taken place last week.
“The initial conversations occurred within the first week of the scheme announcement. And, you know, there have been discussions as recently as last week,” Thomas said.
“My understanding is that there were separate conversations that took place with Brookfield.
“I personally spoke to them and offered them the opportunity to participate in the EIG side of the transaction. They declined that offer,” Thomas said, adding this initial approach to AustralianSuper was made in March after Origin’s board signed a binding scheme implementation deed supporting the takeover.
AustralianSuper did not want to be part of a consortium bid for Origin Energy because it did not want the exposure to the power company’s coal seam gas business, he said.
‘We believe we can win, and we’re pulling out all the stops to make that happen.’
Under the deal’s terms, Canada’s Brookfield will end up with Origin’s power generation and retailing division, which supplies about 4.5 million customer accounts. MidOcean Energy – a liquefied natural gas company formed by US-based EIG – will acquire Origin’s interest in a Queensland LNG joint venture, Australia Pacific LNG.
AustralianSuper declined to comment further. The fund’s statement says it will be voting against the takeover scheme when it is put to shareholders on November 23.
“AustralianSuper believes the ongoing energy transition, as we move towards net-zero by 2050,
has further enhanced the value of strategic energy transition platforms, such as Origin, whether
public or private,” the fund said.
Brookfield and EIG need 75 per cent of Origin’s shareholders to approve their offer, a significant task as many shareholders often fail to vote in scheme deals.
Thomas said the consortium had launched a shareholder blitz.
“We believe we can win, and we’re pulling out all the stops to make that happen. It’s a full-throated campaign that’s highly co-ordinated between the company and the consortium. We’re going to make every effort to win that.”
He accused AustralianSuper of being opportunistic, adding the consortium had a plan B if it failed to win approval for the deal, which may involve a conditional takeover of the power giant.
“Obviously, when you head into transactions like this big complicated M&A, there are always alternatives. There’s a plan B, there’s a plan C, and you know, we’ve negotiated some flexibility into our scheme documents with the company. If necessary, we’ll use that flexibility.”
Before the consortium’s latest bid, analysts had been suggesting a bid closer to $10 might be needed to win over investors due to the independent expert’s report suggesting Origin might be worth more than the earlier $8.91 offer.
It is not just Origin investors with a lot at stake. Brookfield has pledged to spend up to $30 billion on green energy investments – far more than Origin could afford on its own – if the proposed takeover succeeds.
If plan B eventuates, the structure of EIG and Brookfield’s relationship means AustralianSuper risks being marooned in a listed Origin that is left with only the Australia Pacific LNG assets that it does not want. Thomas said EIG was the acquiring entity in the consortium, and the successful execution of plan B could mean EIG becomes the majority investor in a listed Origin, which would sell off the energy retail business and its power stations to Brookfield.
Australia’s competition watchdog has approved the takeover saying the public benefits outweigh competition concerns, but the deal still needs a green light from the Foreign Investment Review Board.
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