Origin seeks improved bid from Brookfield, small investors ‘missing out’

The energy group is in late talks amid doubts over the value of a ‘Plan B’ deal lobbed last week, while the ASA warns small investors are missing out.

Origin Energy will hold talks with foreign suitors Brookfield and EIG about whether the pair can improve their $20bn takeover bid, amid doubts over the value of a “Plan B” deal lobbed last week.

The company’s board has already said a revised offer “appears inferior” after a last minute deal was tabled on Wednesday night, which led to a scheme meeting vote on Thursday being delayed.

It may now look to test whether an alternative bid could be brought to the table given the complexity and questions over valuations from the current offer, sources told The Australian.

The board had yet to settle on a position on Sunday but held reservations over aspects of the reworked offer and may look to hold further talks before reconvening for a final decision.

One option may look at whether any middle ground can be found between the investor suitors and AustralianSuper, Origin’s largest shareholder, whose opposition to the original pitch largely sunk the buyout.

Brookfield and EIG late on Wednesday submitted a revised offer that will see shareholders offered $9.43 a share. But if that bid is rejected by shareholders, Brookfield and EIG have proposed an alternative structure that sees shareholders offered $9.08 a share.

The developments come as the Australian Shareholders’ Association warned small shareholders will miss out on the opportunity to continue to own Origin Energy shares under the revised deal.

ASA chief executive Rachel Waterhouse told The Australian the revised proposal was “unfair” to small shareholders as it gave institutional shareholders the chance to reinvest in Origin’s energy markets business if it was taken over by Canadian investment giant Brookfield.

Ms Waterhouse said this was yet another instance where the interests of small shareholders were overlooked. She said ASA members were concerned about companies like Origin being sold and delisted from the ASX.

“They don’t have access to the same companies that institutions do, to sectors that potentially go private,” she said.

Shareholders were also concerned that the bidding process, which began with an indicative offer last November and firmed up into an offer in March, had been “dragging on”.

“This is a very long process with a lot of different information points and packs for retail shareholders to go through,” she said.

“(With the new bid) they are going to have to go through all of that again with the scheme meeting being deferred.” Ms Waterhouse said retail shareholders got “really angry” when their interests were seen to be overlooked in favour of institutional shareholders.

She said this had included cases in the past when companies gave institutional shareholders the chance to participate in a capital raising but didn’t offer the same deal to small shareholders.

The ASA has not taken a stance on whether shareholders should accept the initial deal from Brookfield of $9.43 a share.

The future of that bid is now uncertain given the revelation that it would not have received the necessary 75 per cent voter support if the special meeting had been held last Thursday. The meeting was deferred until December 4.

Shareholders are now awaiting more information from the Origin board, following the release of a revised bid which includes the potential for institutional share­holders to remain invested in Origin’s energy markets business if the company were privatised.

The board has already indicated that the revised bid is less attractive than the initial bid.

Ms Waterhouse said a “large group” of the ASA members wanted Origin to remain listed on the ASX to give them continued access to the energy transition story in Australia.

ASA chief executive Rachel Waterhouse.

She said one member sent her a text which said: “I urge the ASA to support the efforts of AustralianSuper … Too many of our major businesses have been cherry picked off the ASX. If we are not careful, we will end up with an exchange that is left with not many large businesses.”

While some ASA members might want to accept the bid to lock in a profit, others did not want to sell at this point as it would have capital gains tax implications that they had not planned for she said.

“When (a share sale) is forced on you, it means you can’t invest in the company anymore and get the returns from it,” she said.

She said the ASA would like to see more details of the revised offer from the consortium partners before it made its broader views on the proposal public.

“At this stage, there is more detail we need to see,” she said.

“It is a complex offer and there is more information required for retail shareholders and for us to go through the details.”

The ASA’s discussion paper on the proposed bid also warned that if the bid did not go through it could be “challenging” for the directors and possibly its executives, given the strong commitment of the board to the deal.

It points out that Origin’s current executives stand to “benefit substantially” if the scheme is approved, through the immediate vesting of a range of share rights which had been accrued in recent years and would revert to cash payments.

This was outlined to shareholders in the explanatory booklet on the proposal.

“Origin has said that if the scheme fails to be accepted, it will revert to ‘business as usual’,” the ASA paper says. “Given the strong commitment of the current ­directors and presumably management to the change in ownership, such a turnaround could be challenging.”

In a note to members on Friday, Ms Waterhouse said the events of the week were a “reminder that corporate transactions, which always drag out, can also be really messy”.

She said the ASA agreed that Origin directors had no option but to defer the proposed meeting to vote on the deal, given the late emergence of a revised offer which they would need to consider.

“We expect them to update shareholders prior to the December 4 meeting,” she said.

Originally published as Origin seeks improved bid from Brookfield, small investors ‘missing out’