Origin Energy’s two North American suitors have finally signed a binding deal, agreeing to the terms of an $18.7 billion takeover for the Australian power and gas giant, ending a drawn-out due diligence process and more than four months of talks.
Origin, one of the largest Australian energy suppliers, last year opened its books to a consortium of Canadian asset giant Brookfield and US-based energy investor EIG, which lobbed a surprise $9-a-share bid to buy the company and divide its assets between them.
Origin Energy’s board intends to unanimously recommend shareholders support the deal when it is put to a vote.Credit:Bloomberg
The bidders subsequently pared back their offer price slightly from $9 to $8.90 a share, following large swings in global energy prices and the federal government’s introduction of temporary limits on coal and gas sales on Australia’s eastern seaboard, which will affect revenue from Origin’s interest in a Queensland liquefied natural gas (LNG) venture.
On Monday night, Origin, Brookfield and EIG said they had entered into a binding agreement, which Origin Energy’s board intends to unanimously recommend shareholders support when it is eventually put to a vote. The final offer increases value of the proposal to $8.91 for each Origin share – a 53 per cent premium to the company’s share price before the initial offer was made in November.
“The board is unanimous in its view that this transaction is in the best interests of shareholders,” Origin chairman Scott Perkins said. “The transaction represents a significant premium to the share price prior to the original indicative proposal, and reflects the strategic nature of Origin’s platform, its growth prospects and anticipated earnings recovery.”
Brookfield, which is seeking to acquire Origin’s domestic energy generation and retail business to accelerate its shift to renewables, has said it believed the company will play a lead role in helping the nation meet its climate targets.
Origin last year opened its books to a consortium of Canadian asset giant Brookfield and US-based energy investor EIG after a surprise bid was lobbed.Credit:Joe Armao
If the takeover deal succeeds, the Canadian-based asset manager says it will invest another $20 billion to build an additional 14 gigawatts of renewable energy and storage to help replace the looming closure of Origin’s Eraring coal-fired power plant in NSW and transform Origin into Australia’s largest clean energy owner by the end of the decade.
“We will build on the success of our global renewable power and transition business where we have a mandate to ‘go where the emissions are’ in putting billions of dollars behind an executable plan to reduce emissions at Origin,” Brookfield Asia-Pacific chief executive Stewart Upson said.
As the energy grid’s shift away from coal-fired power continues to gather speed, Brookfield’s chairman, Mark Carney, said Brookfield believed Origin could “lead the way … at this critical moment for the Australian economy”.
“What’s needed is increasingly clear: faster deployment of large-scale renewables, the accelerated, responsible retirement of coal generation, and an interim, supportive role for gas as the dependable back-up fuel,” Carney said.
Brookfield on Monday revealed its co-investors would include Singaporean institutional funds GIC and Temasek.
EIG, which is seeking Origin’s 27.5 per cent interest in the Australia Pacific LNG (APLNG) gas venture, said APLNG had an important role to play in the energy transition and would serve as the foundation for the company’s larger LNG ambitions.
The takeover offer is conditional on the support of Origin shareholders and on approvals from Australia’s Foreign Investment Review Board (FIRB) and the Australian Competition and Consumer Commission (ACCC).
One potential area of competition concern may arise from Brookfield’s ownership of Victorian electricity transmission and distribution network operator AusNet.
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