Origin shares buy-up could jeopardise $16bn buyout proposal

Origin, which owns a stake in Queensland APLNG gas business and is the country’s largest energy retailer, would be less valuable to Brookfield and EIG by way of a takeover.

There is a theory building in the market that it makes sense for Brookfield and EIG to launch a takeover bid for Origin Energy before shareholders are due to vote on its $16bn buyout proposal in two weeks time.

If a takeover bid is on the table, where shares are bought directly on the market, it makes it increasingly tough for the company’s largest shareholder, AustralianSuper, to amass a stake beyond its current holding of just under 15 per cent.

Shares would be trading at the value of the takeover bid, and therefore hedge funds on the register would be reluctant to sell.

The country’s largest superannuation fund opposes Origin’s $9.53 per share offer and said it would vote against the deal.

It is running out of time to buy more shares, with proxy votes going in on November 21 ahead of the vote on November 23.

A shareholder needs to have owned shares before November 21 for them to count in the vote, so it literally only has days to scoop up more stock to take its stake up to 19.9 per cent to assert more dominance.

While the current state of affairs makes it tough for a vote to succeed, some think it’s not impossible. Three-quarters of the shares voted need to be in favour of a transaction, but if there’s a large turnout of shareholders to vote there’s a slim chance it could pass, provided Perpetual, which was said to be wavering on the deal, votes its 3 per cent in favour.

Origin Energy’s register is believed to be similar to Ausnet’s where 86 per cent of the register turned out for last year’s $10bn buyout by Brookfield, so if the turnout was that strong it could help the bidders.

Shares in Origin Energy closed at $8.74 and AustralianSuper previously bought shares at up to $8.65.

Origin, which owns a stake in Queensland APLNG gas business and is the country’s largest energy retailer, would be less valuable to Brookfield and EIG by way of a takeover, as debt would be more expensive, there would be more tax costs and the business would be less valuable if the suitors are unable to own it in full.

Some estimate that it may be the suitors value it about 29c a share less than the offer currently on the table, putting any takeover bid at about $9.15 per share.

Origin Energy agreed to waive the standstill agreement for Brookfield and EIG that restricts them buying shares, provided that if they purchase more than 5 per cent the acquisition needs to be accompanied by a takeover bid with a condition of a minimum 50.1 per cent acceptance threshold.

Proxy firm ISS has said the offer was “higher than even the most opportunistic view of the independent expert” and shareholders had the choice to take the proposal “versus taking on the risks, uncertainty, volatility and cost of the energy transition themselves”.

Advising Brookfield and EIG are Citi, JPMorgan and UBS, while Origin is advised by Barrenjoey and Jarden and AustralianSuper Lazard.