AustralianSuper rejection of new Origin bid by Brookfield, EIG leaves deal on knife’s edge

Origin Energy’s biggest shareholder AustralianSuper has rejected an increased takeover bid for the energy major, saying it ‘remains substantially below’ its long-term value estimate.

AustralianSuper has rejected Brookfield and EIG’s revised takeover offer for Origin Energy, leaving the near $20bn deal for Australia’s largest electricity and gas retail company hanging on a knife’s edge.

Brookfield and EIG on Thursday increased their bid for Origin Energy to $9.53 a share, with what it described as its “best and final offer” of $19.9bn.

The revised offer was initially seen as sufficient to win wholesale support, but in a blow to Brookfield and EIG – AustralianSuper said it will reject the offer and moved late on Thursday to increase its own stake in Origin by an extra 1 per cent.

“The offer from the consortium remains substantially below our estimate of Origin’s long-term value,” AustralianSuper said.

“AustralianSuper believes Origin has a highly strategic portfolio of assets to participate in, and benefit from, the energy transition. AustralianSuper believes the ongoing energy transition, as we move towards net zero by 2050, has further enhanced the value of strategic energy transition platforms, such as Origin, whether public or private.”

AustralianSuper holds nearly 14 per cent. AustralianSuper was offering to pay up to $8.65 a share, a premium on the $8.47 that shares in Origin closed at.

A spokesman for AustralianSuper declined to comment.

Sources familiar with the details of the move said it would give AustralianSuper more leverage as the battle for control of Origin grows increasingly bitter.

AustralianSuper had previously said it would reject the consortium’s initial offer of $8.81 a share, joining a spate of other shareholders who said they reject the offer – then leaving the deal on the brink.

The move by AustralianSuper dashes Brookfield and EIG’s hopes of its new bid winning overwhelming support from Origin’s shareholders.

Brookfield and EIG lifted their offer by 69 cents per share, worth an extra $1.2bn. It marks a 70 per cent premium to where shares in Origin Energy were trading when the initial bid was submitted in November 2022.

Brookfield and EIG on Thursday increased their bid for Origin Energy to $9.53 a share, with what it described as its ‘best and final offer’ of $19.9bn.

Brookfield Asia Pacific chief executive Stewart Upson said the offer was lucrative for shareholders and beneficial for Australia’s energy transition.

“Our revised offer price is our best and final offer as to price under the scheme and is a compelling opportunity for shareholders to realise the value of their investment. Our proposal is now higher than the top of the valuation range identified in the independent expert’s report and is endorsed by the Origin board,” Mr Upson said.

Local advisory firm Grant Samuel 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.

The revised Brookfield and EIG offer has swayed a number of Origin shareholders, including Allan Gray, while others such as Jamie Hannah, portfolio manager at VanEck, said the offer have revived hopes of a deal and they considering reversing their opposition to selling to the consortium.

“I was a no, but I am now a maybe,” Mr Hannah told The Australian.

The offer, however, falls short of what shareholders deemed a knockout price, with some angling for more than $10 a share.

Brookfield and EIG must secure more than 75 per cent of shareholder support at a vote on November 23 for the deal to progress.

Luke Edwards, head of renewables at Brookfield, said shareholders in Origin face a stark choice, and the consortium have options even if the votes goes against them.

“There is a very high chance that an Origin shareholder will not see $9.53 per share for quite some time,” Mr Edwards said.

“We still have the option to acquire Origin. We kept our options open if there was a no vote. By definition, if we did that then we would be coming back in at a lower price.”

Shares in Origin fell as much as 6.6 per cent as investors weighed the prospect of the deal collapsing and banked profits.

Brookfield and EIG negotiated the option to switch its bid for Origin to an off-market purchase if it was unsuccessful.

Such a takeover would be subject to an acceptance level by Origin shareholders of 50.1 per cent,

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.