Origin Energy delays vote as new Brookfield takeover bid lobbed

Origin Energy’s largest shareholder, AustralianSuper, plans to reject new takeover offers tabled by Brookfield and EIG in the latest blow for the foreign consortium.

Origin Energy has cast doubt over a last minute takeover offer lobbed by suitors Brookfield and EIG, after a planned vote on the original deal was delayed after the $20bn buyout faced defeat by several major shareholders.

A revised bid from Brookfield and EIG Partners appears inferior to previous offers, Origin said on Thursday, though it said it will work through the revision before making a final determination.

Brookfield and EIG have submitted a so-called two headed offer that sees the duo offer an alternative plan that would see the Canadian private equity giant purchase Origin’s energy market business, while investors in the country’s largest energy retailer will be offered the chance to buy into the private entity.

Origin said a rescheduled vote has been scheduled for December 4. It said it had not yet determined its recommendations to shareholders, but indicated it was not initially favourable.

“The Board has significant reservations as to the complexity, conditionality and differing value, and potential adverse tax outcomes to Origin and shareholders, nevertheless the Board has a responsibility to fully assess this revised proposal so it can provide an informed view about its merits or otherwise to shareholders,” Origin said in a statement.
Origin Energy’s largest shareholder, AustralianSuper, plans to reject new takeover offers tabled by Brookfield and EIG in the latest blow for the foreign consortium.

AustralianSuper already rebuffed earlier buyout bids by the duo and said the Plan B deal was a “low-ball” offer.

“AustralianSuper can today reaffirm that it will reject the last-minute attempts by the Brookfield

and EIG-backed consortium to buy more time in its efforts to acquire Origin Energy,” a spokesperson said. “AustralianSuper will be voting against the revised proposal for Origin, made public by the company board today, if the board decides to put it to a vote.”

“This latest low-ball offer strengthens AustralianSuper’s view that the offer remains substantially

below our estimate of Origin’s long-term value. AustralianSuper is resolute the value and future value of Origin is better in the hands of AustralianSuper members and other shareholders than a private equity consortium planning to shortchange them.”

Origin Energy chief executive Frank Calabria. Picture: Britta Campion

Based on the proxy votes received to date, had the scheme meeting proceeded today, it is unlikely that the Scheme would have achieved the required 75 per cent approval by shareholders, Origin says.

The revised proposal adds a potential opportunity for institutional shareholders to re-invest into the mooted Brookfield owned energy markets business after completion of the scheme, on the same terms as currently proposed to Origin shareholders, including a total cash payment of approximately $9.431 per share.

An alternative deal would see Brookfield buy Origin’s energy markets business with EIG to launch a takeover offer for Origin.

Brookfield’s attempt to re-work its $20bn takeover of Origin Energy “is a bit of a mess”, according to Morgans analyst Max Vickerson.

“This is a bit of a mess. Clearly the bidders are pulling out all the stops to try and resurrect the deal. It remains to be seen if the offer to remain invested in the Energy Markets business will satisfy Australian Super given that they have rebuffed similar approaches in the past,” Mr Vickerson told The Australian.

A back-up deal would involve Brookfield buying the energy markets business and an off market takeover offer by EIG for Origin.

“The alternative offer could have a better chance of succeeding and clearly EIG / Brookfield are hoping so given that they will have seen the proxy votes for the previous proposal,” said Mr Vickerson. “My estimate of fundamental value is below both offers so I think there is compelling upside for shareholders but it’s hard for the average shareholder to gauge the likelihood of success of either proposition.”

Investors had been scheduled to meet at 2pm on Thursday to deliver their vote on the Brookfield-led takeover of one of the nation’s biggest electricity generators, with the $200bn AusSuper signalling its determination to reject the deal and keep Origin in public hands over the long term.

Origin chairman Scott Perkins apologised to shareholders on Thursday for its last minute decision to cancel its scheme meeting in which shareholders were to be asked to approve the company’s sale to a consortium led by Brookfield.

Mr Perkins said he hoped shareholders understood that the cancellation of the meeting was “outside of Origin’s control” and the board was faced with no option but to adopt this course of action.

“Given no formal business will be considered at today’s meeting, it is not appropriate for me to take questions at this time. I understand that shareholders will have many questions related to the Scheme, which I look forward to addressing at the resumed meeting on 4 December 2023,” he said.

Origin was earlier placed into a trading halt on Thursday.

The move comes after Origin Energy’s chairman and chief executive undertook an eleventh-hour campaign to win over wavering shareholder support for the $20bn Brookfield takeover following firm opposition to the deal from cornerstone shareholder AustralianSuper.

Mr Perkins and his CEO Frank Calabria have both spoken with big investors – including several industry super funds – in recent days, seeking their support for the mega buyout that now hangs in the balance.

Origin shares rose 11c or 1.3 per cent to $8.53 in afternoon trading on Thursday, still a sizeable discount to the $9.43 a share offer.

It is understood $160bn Aware Super, the nation’s third-largest fund, has backed the Brookfield offer, with its internal processes seeing the offer delivering value to members.

Several mid-sized industry super funds including Vision are believed to have supported the deal, given they don’t have the balance sheet size or tens of billions of annual inflows to support the risk appetite of AusSuper.

Under focus is $215bn infrastructure investor IFM Investors, owned by more than dozen industry funds including AusSuper, which has a stated long-term strategy of investing in renewable energy projects here and around the world. Also under the spotlight is Brisbane-based Australian Retirement Trust, the nation’s second-largest super fund. ART and IFM Investors had been expected to disclose their votes following Thursday’s meeting.

Former Origin chief Grant King. Picture: AAP

Origin’s inaugural chief executive Grant King, who oversaw the initial growth of the energy major after it was spun out from Boral more than two decades ago, said the company has been on a consistent path since it listed. And that takes in renewable energy, gas development and flexible energy generation all hedged by a retail energy business.

“That strategy is now being hotly fought over by a variety of people, that’s certainly a degree of external affirmation it has been on the right path since the day it was started,” Mr King said.

Mr King, who retired in 2016 after 16 years in the role, declined to say which way he intended to vote his shares, saying it was a matter for all shareholders to consider the offer on its merits.

AusSuper has spent more than $400m on a buying spree to increase its stake in Origin in recent months, moving to a holding of more than 17.5 per cent.

This falls short of the 25 per cent stake needed to prevent the takeover from moving ahead, but it is quietly confident it has support to prevent the deal.

One investment banker suggested AusSuper topping out its buying spree out at 17.5 per cent was a sign that the fund felt it had secured enough votes with support from others.

Offshore investors in general have supported the takeover, and this extends to some of the world’s biggest investment funds. The $US1.4 trillion Norges Bank has backed the acquisition.

AusSuper has said it believes Origin’s shares are being undervalued. It has said Origin is “well-placed to take a leading role in the energy transition”. It has also pledged to provide significant funding to help Origin “to take a leading role in the energy transition”. As part of Brookfield’s pitch, the US-listed asset manager has pledge as much as $30bn over the next decade to help Origin switch out of coal into green energy.

A defeat of the takeover would mark a significant blow for Brookfield’s efforts to secure a position in Australia’s renewable energy and is almost certain to see some of its consortium members walk away.

Originally published as Origin Energy delays vote as new Brookfield takeover bid lobbed