Brookfield and EIG’s near $20 billion acquisition proposal for Origin Energy (ASX: ORG) failed to gain the required majority in a shareholder vote on 4 December but the company noted that a large proportion of shareholders had voted in favour of the deal it had recommended.
The scheme of arrangement deal required at least 75% of votes in favour, but the final tally fell short with 68.92% of votes cast in favour and 31.08% against.
The outcome was clearly decided by AustralianSuper which had built up its stake in Origin to more than 17% ahead of the vote and had repeated stated it would vote against the deal which it believed undervalued Origin.
Origin chairman Scott Perkins said: “While the scheme will not proceed, it was supported by many Origin shareholders. Importantly, this process has made clear the confidence all shareholders have in Origin’s business, assets and people, and its strategic positioning for the energy transition.
“We look forward to the continuing support of our shareholders as we focus on delivering on our strategic priorities, accelerating investment in cleaner energy and storage and pursuing our ambition to lead the energy transition.”
The result of the vote sent Origin’s shares down 3.9% to an eight-month low of $7.86, more than 16% below the offer price.
AustralianSuper remained adamant that its action in blocking the deal was in the national interest.
“We have never wavered in our belief that the value and future value of Origin is better in the hands of members and other shareholders rather than a private equity consortium seeking to make a quick return.” a spokesman for the fund said.
The super fund also said it was “open to providing capital to assist Origin as it prepares to transition over the coming decades”.
This will need to be substantial as during the bidding process Brookfield indicated it was prepared to invest $20-$30 billion, much more than Origin had planned.
Brookfield noted what it described as “strong” support for its proposal but made no announcement about how it would respond to the failure of the scheme offer despite previously saying that it might return quickly with a lower value off-market takeover bid that would require only a simple majority shareholder vote in favour.
A Brookfield spokeswoman said the firm “would consider its next steps, if any, with respect to Origin, given the strong level of Origin shareholder support” for its proposal. The Canada-based global infrastructure investor was also taking into account the potential impact on Origin of the federal government’s recent announcement that it proposed to expand its Capacity Investment Scheme and National Energy Transformation Partnership.
Brookfield has planned to take control of Origin’s electricity generation and distribution business with US-based EIG acquiring its liquid natural gas (LNG) business.
As the party responsible for the failure of the massive offer, AustralianSuper will now be under pressure to successfully support the transition of Australia’s largest power company to a clean energy provider while also ensuring its investment generates adequate returns for its members.
This is a bold bet clearly shaped by AustralianSuper’s confidence in its estimation of the long-term value of Origin but in the short term it will likely have to weather a falling share price.
Disclosure: The writer holds shares in Brookfield and is an AustralianSuper member.