30pc of Origin votes had rejected Brookfield and EIG bid

Brookfield and EIG have kept alive their bid for Origin Energy, but proxy vote results indicate it will have a tough task to win control of Australia’s largest electricity and gas retailer.

About 30 per cent of Origin shareholder votes cast had opposed Brookfield and EIG Partners’s near $20bn deal for Australia’s largest electricity and gas company, before a last-ditch revised offer from the consortium delayed an inevitable defeat.

The voting figures indicate the opposition from some big investors as Brookfield and EIG continue to court Origin Energy, the signature transition investment of the Canadian private equity giant.

The bid for Origin, which has been grinding for more than a year, looked set to reach a conclusion on Thursday when shareholders were set to vote on the $9.43 a share offer.

The overwhelming majority of shareholders had already lodged their votes, but the final results would not be known until after in person voting had occurred.

Brookfield and EIG needed support of 75 per cent of Origin’s shareholders to progress the deal.

A final vote, however, was suspended when Brookfield and EIG tabled on Wednesday a last-ditch two-pronged offer, which was just in time as The Australian understands the consortium had won support from 70 per cent of the Origin shareholders that had cast their ballots.

By submitting a fresh offer to the board of Origin, however, the consortium have bought themselves time to resurrect their initial bid while simultaneously hoping the board of directors endorses their revised bid that would effectively sideline and mitigate the influence of AustralianSuper — Origin’s largest shareholder.

Under the terms of the new offer, Brookfield and EIG will pay shareholders $9.43 a share, with the option of institutional investors buying in. This also requires support of 75 per cent of shareholders, which Brookfield and EIG was on course to fail to reach.

If that vote fails, then Brookfield and EIG has proposed that Origin shareholders would be offered $9.08 a share from EIG and Brookfield would buy the energy markets business for $12.3bn from its consortium partner. Critically, this deal requires support from 50.1 per cent of Origin’s shareholders, undercutting the capacity of AustralianSuper — which has a 17.5 per cent stake in Origin — to scupper the deal.

Sources familiar with the thinking of the consortium said the alternative deal price reflected the tax the duo would have to pay to complete the structure.

Origin’s board of directors has said it has yet to reach a formal decision on the revised bid, but the company’s chairman Scott Perkins said the energy giant has significant reservations about the offer. “$9.08 against $9.43 — this isn’t a trivial difference,” Mr Perkins told reporters in Sydney.

Even in the unlikely event that Brookfield and EIG can sway Origin’s board on the merits of the transaction – several shareholders said they would be reluctant to accept a lower price.

“We supported the transaction but an offer of $9.08 does not look attractive for us,” said one investor who declined to be named.

“I really don’t think the Origin board recommend the revised bid so it probably won’t get to a vote, but if it does — they might be able to scrap together 50.1 per cent.”

All would not be lost, however, for Brookfield and EIG if the board — as expected — rejects the offer. The consortium will have an additional two weeks to lure investors to its offer of $9.43 a share.

There are also 30 per cent of shareholders that had not cast their ballots before the vote was suspended that Brookfield and EIG will focus on and securing those votes would be enough.

Shareholders who did not vote would likely have been retail investors, which own about 30 per cent of Origin. The consortium had launched a widespread campaign to sway retail investors, and efforts were bolstered by recommendations from several proxy advisors.

If the consortium cannot pick up new votes, and potentially even losses some influential investors, then attention will quickly turn to any so-called plan C from Brookfield and EIG.

EIG chief executive Blair Thomas earlier this month said the company had a “plan B and a plan C”, comments initially dismissed as bluster before the revised bid was submitted.

Origin shareholders said the expected Brookfield and EIG could elect to try to undertake a hostile takeover, but they said it would extremely problematic.

“They could try to do a hostile takeover, but AustralianSuper has 17.5 per cent and so how do they get to 90 per cent before you have the compulsory acquisition,” said a second Origin shareholder.

The future uncertainty over the future will not be welcomed by Australian officials, which had hoped the deal for Origin would accelerate the country’s transition away from fossil fuels.

Brookfield has promised to develop 14GW of new renewable energy generation assets, extremely attractive for Australia as it struggles to achieve its ambitious target of having renewable sources generate more than 80 per cent of the nation’s electricity by 2030.