December vote now mooted for ‘tweaked’ Brookfield/EIG Origin Energy dual offer

Origin Energy Managing Director Frank Calabria, at their offices in Barangaroo in Sydney. Picture: Britta Campion

Origin Energy is suspending plans on Thursday for a shareholder vote on a $16bn buyout proposal by Brookfield and EIG for the country’s largest energy retailer after the receipt of a new offer from the suitors.

The new vote will happen in December on a recut deal that will not involve AustralianSuper rolling into the offer, and not necessarily a higher price but differing terms.

It comes after the bidders are understood to have put forward a revised proposal for the company Wednesday night that involves another scheme of arrangement offer, where shareholders vote on the proposal.

Also on the table is an alternative takeover bid at the lower price of $9.20 per share that has been in the works for weeks, as first reported by DataRoom, where shareholders can sell their holdings to the bidders.

DataRoom revealed on November 7 that the bidders were planning to launch a takeover bid before Christmas that would be hostile against major shareholder AustralianSuper, buying shares on market, with some estimating it could be pegged at about $9.15 per share.

The situation is unfolding as an increasing level of doubt had been building over the level of support for a $9.53 per share offer put forward by the bidders due to the stance on the offer by Origin’s largest shareholder, AustralianSuper, which sees further upside in the company.

Currency exchange movements between the US dollar and Australian dollar means the offer is now worth $9.43 per share.

It is understood that Origin will tell shareholders on Thursday that the meeting, scheduled for 2pm, has been adjourned, as shares remain halted.

The suitors and Origin Energy’s board remained in negotiations on Wednesday with a new offer on the table and the board met that night.

Origin’s announcement will include information on the state of the country’s energy market and will address the impact on the company of the government’s Capacity Investment Scheme, where the government will no longer deal with energy retailers for the development of new renewable energy infrastructure but infrastructure developers directly.
It will also outline how delaying the vote by weeks will allow time for approvals from the Foreign Investment Review Board and the national electricity regulator to come through.

AustralianSuper has amassed 17.5 per cent of the stock.

Market observers earlier in the week believed the bidders had an uphill battle gaining enough support for the vote to succeed while the largest shareholder was not on their side, needing 75 per cent of those who vote to be in favour.

AustralianSuper has called in its own investment banking adviser to offer assistance, Lazard, while Origin is working with Barrenjoey and Jarden and the bidders are advised by Citi, JPMorgan and UBS.

While the other option for Origin was believed to be a deal where the bidders launched a takeover bid, buying shares on market, many market experts questioned how such an offer would succeed or could make sense for the suitors.

With the chance they would be able to only obtain just over 80 per cent of the company, the business would be less valuable for the consortium, which planned to carve up the company, where Brookfield would take the retail energy business and EIG the gas operation.

Funding would be harder and more expensive to obtain, and while the group could win a vote to sell off parts of the company after gaining over 50 per cent, tax costs from doing so would be in the billions of dollars.