Alternative offer for Origin rejected

Origin Energy (ASX: ORG) has finally rejected a complicated alternative offer put forward by private capital suitors Brookfield and EIG.

The company announced rejection of the offer on 30 November. The global infrastructure investors’ now face the prospect of their near $20 billion $9.39-a-share current offer being rejected in a shareholder vote on 4 December.

That would not necessarily be the end of their bid to acquire Australia’s largest energy company. Brookfield and EIG previously warned that, were their scheme of arrangement deal – which was accepted by the company at a lower rate than the current offer –rejected by shareholders, then they would consider making a hostile bid at a lower valuation. That ominous possibility is now being referred to as “Plan C”.

Under Plan B, if the scheme of arrangement deal was rejected, oil and gas specialist private equity firm EIG would have bid $9.08-$9.33 a share for Origin, retained its Australian Pacific liquid natural gas (LNG) business and on-sold its energy markets business to Brookfield for $12.3 billion.

The Origin board said Plan B was incomplete, highly complex and too complicated to be put to shareholders. They continued to recommend shareholders to vote in favour of the existing offer.

Specific objections to Plan B were that it required; finalisation of funding arrangements, updated regulatory approvals, favourable rulings from the Australian Taxation Office and revised legal documentation.

The board confirmed earlier expressed doubts that any improved returns that that might be perceived in the alternative offer were put in doubt by the extended timeline that completion would require.

“Following careful consideration and including obtaining advice from its advisers, the board considers the revised proposal is not in the best interests of Origin or its shareholders,” the company said.

More than 75% of Origin’s shares will need to be voted in favour for the bid to succeed. That seems highly unlikely with largest shareholder, Australian Super, which holds more than 17% of the company, maintaining that it will vote against the bid.

Brookfield and EIG have, however, been drumming up support for their offer.

Origin said that if the bid fails its board and management would continue to execute the company’s strategy including its “ambition to lead the energy transition in Australia.”

The company added: “Consistent with its duties, the board will remain open to strategic options that enhance shareholder value.”

Disclosure: The writer holds shares in Brookfield and is a member of the AustralianSuper fund.