Origin Energy Takeover Bid Faces Opposition from Largest Shareholder
Origin Energy, Australia’s biggest energy retailer, is facing opposition to a takeover bid from its largest shareholder, AustralianSuper. The pension fund has announced that it will vote against the A$16.40 billion ($10.55 billion) offer from a consortium led by Brookfield, making it difficult for the bidder to gain control of the company. AustralianSuper believes that the offer remains substantially below the long-term value of Origin Energy.
The consortium’s increased offer of A$9.53 per share represents an 8% increase from the previous bid, but AustralianSuper argues that it does not accurately reflect the strategic portfolio of assets that Origin possesses. The fund manages A$300 billion in assets and has a 13.68% holding in Origin, which could significantly impact the outcome of the deal. Approval from 75% of shareholders is required for the bid to succeed.
This development highlights the influence of Australia’s pension sector, which manages A$2.4 trillion in retirement assets, equivalent to the value of the local stock exchange. AustralianSuper’s rejection of the offer indicates that the deal’s chances of going ahead are now very slim.
The consortium, which includes EIG’s MidOcean Energy, has stated that this offer is its best and final proposal, meaning that unless a rival bid emerges, it cannot be increased further. Brookfield, the lead member of the consortium, has not commented on AustralianSuper’s announcement.
If the bid fails to secure shareholder approval, a revised agreement allows the consortium to make a subsequent off-market bid if it acquires 5% or more of Origin’s shares. This option requires only 50.1% shareholder support, providing an alternative route for the buyers to proceed.
While Simon Mawhinney, managing director of fund manager Allan Gray, supports the increased offer, he believes that the opposition from AustralianSuper is likely to scuttle the deal. If the bid is rejected, Brookfield may have the option to return with an off-market takeover offer.
Origin Energy’s board, however, unanimously recommends accepting the current offer, unless a stronger bid emerges. Brookfield has positioned its proposal as crucial for accelerating Australia’s shift towards renewable energy, a stance that has been endorsed by the country’s competition regulator.
Under the terms of the deal, if it proceeds, Brookfield and its partners GIC and Temasek will own Origin’s Energy Markets business, encompassing power generation and retailing. MidOcean, in which Saudi Arabia’s Aramco recently acquired a stake, would acquire the integrated gas business, including a 27.5% stake in the Australia Pacific LNG project.
Origin shares experienced a significant drop in value following AustralianSuper’s announcement, demonstrating the impact of the pension fund’s opposition. The vote on the takeover bid is scheduled for November 23, and the outcome remains uncertain, awaiting further developments in this high-stakes battle for control of Origin Energy.
