Vote for $20bn Origin deal, shareholder proxy firm Institutional Shareholder Services recommends

Institutional Shareholder Services recommends Origin Energy investors back Brookfield and EIG’s near $20bn takeover bid, despite the energy player’s top shareholder snubbing the offer.

A top shareholder proxy group has recommended investors vote in favour of Brookfield and EIG’s near $20bn deal for Origin Energy, a boost to the prospect of one of Australia’s largest deals in recent years.

Brookfield and EIG must win favour of 75 per cent of Origin’s shareholders if it is to succeed in its bid for Origin, a vote that is expected to be close after AustralianSuper – the retailer’s largest shareholder – said it would vote against the offer.

To secure sufficient support, Brookfield and EIG will need high retail support – and in a boost to that, Institutional Shareholder Services said shareholders should support the transaction.

“The transaction offers shareholders a cash exit at a premium in exchange for surrendering the pay-off of a potential successful energy transition for the company,” ISS said in a note to shareholders and seen by The Australian.

The recommendation was seized on by the EIG and Brookfield consortium, which is intensifying its campaigning to sway Origin’s shareholders as it moves to complete a centrepiece energy transition deal.

“Momentum is clearly building behind our compelling $9.53 per share offer to Origin shareholders,” a spokesman for the consortium said.

“In addition to the favourable investor feedback we have received, today’s ISS recommendation represents another independent voice that supports accepting the compelling and certain value we have offered.

“Origin investors have a clear choice; to accept $9.53 for their shares which is higher than even the most optimistic view of the independent expert – versus taking on the risks, uncertainty, volatility and cost of the energy transition themselves.

“To secure a compelling premium for their Origin shares, all investors should vote to accept our proposal when they vote on the scheme.”

Brookfield and EIG last week lifted their offer by 69c 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.

AustralianSuper, however, continues to insist the offer is too low, and has moved to increase its stake in Origin Energy to more than 15 per cent.

With a significant opposition stake, Brookfield and EIG can ill afford to lose any more votes, especially if the shareholder turnout at the November 23 vote is low.

Significant Origin shareholders such as Allan Gray have said they would support the transition, while others have yet to publicly declare their position.

The uncertainty over the deal’s prospect has weighed on Origin share price. Shares fell more than 6 per cent last week when AustralianSuper said it would vote against the revised bid from Brookfield and EIG, although prices have rebounded slightly since. Origin shares closed up more than 1 per cent on Tuesday.

If the consortium’s bid fails at the shareholder vote, they could return with an off-market bid, which would result in one of the duo buying Origin and then selling a division to the partner.

EIG chief executive Blair Thomas on Monday told The Australian the plan was a feasible option. Under the plan being developed, EIG would purchase 51 per cent of Origin and then sell the energy markets business to Brookfield. Origin would remain a listed company but its sole asset could be a 27.5 per cent stake in the APLNG project in Queensland.

Brookfield and EIG hope the plan would be unattractive to AustralianSuper, which has said its stake in Origin affords it exposure to the transition that it would not secure through APLNG.

But industry sources have said AustralianSuper believes EIG and Brookfield would be keen to avoid such a scenario, as it proves too difficult and not as financially appealing.

Mr Thomas has insisted the deal would be enticing in even an off-market bid, which would be incentivised by a lower offer, though sources close to AustralianSuper said the superannuation giant believes the comments mark an attempt to strongarm it into selling.

Brookfield and EIG have won favour with Australian officials for their bid, as they promise to invest $20bn-$30bn to accelerate the nation’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 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.