AustralianSuper locks in 17.5pc stake for Origin Energy vote
AustralianSuper has finalised how many votes it will be able to cast when Origin shareholders vote to support or reject a near-$20bn bid from Brookfield and EIG Partners.
AustralianSuper will use a 17.5 per cent stake in Origin Energy to vote against Brookfield and EIG Partner’s near $20bn bid for the country’s largest electricity and gas retailer, as the superannuation giant finalises its position ahead of the much-anticipated shareholder vote this week.
AustralianSuper, which has steadily been upping its stake in Origin, now has a sizeable position to potentially block Brookfield and EIG’s $9.53 a share offer for Origin, which Australian authorities believe could accelerate the country’s transition away from fossil fuels.
The latest raid came on Friday, with AustralianSuper now owning 17.5 per cent of Origin - expected to be confirmed by a statement to the stock exchange soon.
AustralianSuper now has insufficient time to add and settle any additional shares to its stake before Origin shareholders vote on the Brookfield and EIG offer on November 23.
Brookfield and EIG require approval from 75 per cent of Origin’s shareholders for the deal to proceed. But with AustralianSuper holding such a sizeable stake, the duo are widely seen as struggling to secure sufficient support.
“It is going to be line-ball. It is not impossible but it is going to be tough,” said one senior energy executive.
If Brookfield and EIG are to secure victory, retailers investors - which make up some 30 per cent of Origin’s shareholders - are going to be critical. But industry sources said the consortium will historically struggle to get enough retail shareholders to cast their ballots.
Brookfield and EIG have mounted a significant campaign, advertising across Australia in the hope of reaching and persuading shareholders.
The hopes of the bidders were buoyed by a spate of recommendations from proxy advisors, which urged investors to back the deal after Brookfield and EIG returned with a revised bid above what an independent expert said Origin was worth.
Local advisory firm Grant Samuel had said Origin shares were valued between $8.45 and $9.48 a share, but noted should the company hit its earnings guidance for the remainder of the calendar year – when the consortium is set to close the deal – and assuming a 10 per cent return on equity – the retailer would be worth at least $8.85 a share.
Retail investors could also be spurred to vote in favour of the transaction as Origin’s share price falls. Shares in Origin fell 1 per cent on Monday to $8.52, well below what Brookfield and EIG are offering.
Should the deal fail to secure enough votes, attention will quickly turn to whether Brookfield and EIG return.
The consortium has the option of returning with an off-market bid, which would require just 51 per cent support. EIG has insisted it would be the lead, purchasing Origin to then sell the energy business to Brookfield - leaving EIG as an owner of just the LNG business.
Sources close to AustralianSuper, however, insist the superannuation company believes EIG would struggle to overcome financing and tax barriers to pursuing such an option.
A defeat for the duo could also dent Australia’s energy transition aspirations.
Brookfield and EIG have won favour with Australian officials for their bid, as they promise to invest between $20bn-$30bn promises to accelerate the country’s transition away from fossil fuels.
Brookfield has said it will develop 14GW of renewable energy generation assets, higher than the 5GW that Origin has currently proposed.
The promise is extremely attractive for Australia as it struggles to deliver its ambitious plan of having renewable sources generate more than 80 per cent of the nation’s electricity by 2030.
Brookfield’s capacity to accelerate generation investment was a key reason the Australian Consumer and Competition Commission approved the consortium’s bid, despite admitting it had some antitrust concerns about the deal.
AustralianSuper, however, deny capital is the biggest obstacle to Australia’s energy transition. AustralianSuper has set aside some $10bn to invest in the country’s transition away from fossil fuels, but it has yet to reveal how it intends to spend the capital.
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