Opposition to Brookfield and EIG’s $17.8bn deal for Origin Energy firms

Brookfield and EIG are struggling to woo sufficient numbers of shareholders for its $17.8bn deal for Origin Energy, with another investor going public with their opposition.

The Brookfield and EIG consortium will have to increase its offer if it is to win the backing of global investment manager VanEck, as opposition to the $17.7bn deal firms.

Brookfield and EIG are struggling to sway sufficient shareholder support for its $8.81-a-share offer for Origin Energy, which is widely seen as a watershed moment for Australia’s energy transition.

Joining growing opposition, portfolio manager Jamie Hannah said the Brookfield and EIG bid was attractive when first made but the outlook had changed and the consortium would need to increase it.

“Anyone can be swayed, but I’m not going to be selling an asset for $8.81 when it’s trading at $9.21,” Mr Hannah told The Australian,

“If you look at the independent report, the top range valuation is $9.48 a share, and while that is top range, it is a long way removed from the offer price. I think they will have to nudge their offer higher.”

Mr Hannah’s comments came as Morningstar said shareholders should reject the offer. Analyst Adrian Atkins said the offer represented a 4 per cent premium to the agency’s valuation of Origin – and that premium was “inadequate”.

Origin’s largest shareholder, AustralianSuper, has also declared the Brookfield and EIG offer undervalues the country’s biggest electricity and gas retailer, echoing similar statements from Perpetual.

AustralianSuper shapes as a defining voter. To succeed, the bid requires the support of more than 75 per cent of votes cast. AustralianSuper and Perpetual hold more than 15 per cent of Origin, leaving little wriggle room for Brookfield and EIG.

Shareholders are scheduled to vote on November 23.

Brookfield and EIG have declined to comment on the push from some shareholders for more value, but The Australian understands the consortium has sought to convince shareholders that its offer is fair value, when considering the impact on them of the vast spending required to develop renewable energy generation assets if Origin remains a public company.

The consortium is likely to highlight the volatility in global energy markets.

Grant Samuel acknowledges this in concluding the valuation of Origin is difficult as Australia embarks on a rapid transition away from coal. But there is significant uncertainty about when coal-fired power stations can be retired without jeopardising reliability and affordability of electricity.

Still, market insiders believe Brookfield and EIG will have to make a better offer, and The Australian reported on Thursday that the consortium’s bankers were working on a revised bid.