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Origin Energy takeover: Timing, details of $11.8bn fund bid for Australian energy giant

By Jenny McCall

11:27, 11 November 2022

A image of a power station in Australia
Origin Energy share price surged by 34% yesterday – the day of the announcement and this year it’s been up 44% - Photo: Getty Images.

Australia’s major energy provider and retailer, Origin Energy LTD (ORGau) has backed an AUD18.4bn ($11.8bn) takeover offer from a consortium group led by Canadian asset management company, Brookfield (BAM), it was announced on Thursday.

ORGau share price surged by 34% yesterday – the day of the announcement and this year it’s been up 44%. 

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Origin Energy LTD (ORGau) share price chart

ORGau has receiced a knock-out offer - experts claim

Along with its partner MidOcean Energy and backed by private equity firm EIG, Brookfield (BAM) said it sees “big opportunities” in Australia to start investing in the transition to cleaner energy.

"Together, Brookfield and Origin can support Australia’s multi-decade transition journey and accelerate our progress towards its emissions-reduction targets," Brookfield's Asia Pacific Chief Executive Officer Stewart Upson said in a statement.

ORGau, which is Australia’s no.2 power producer had refused two previous offers from the Brookfield (BAM)/EIG consortium. The bid will see Brookfield acquire all the issued shares for AUD9 per share.

Reports state that previous offers came in at around AUD7.95 per share and AUD8.70-8.90 per share and were made in August and September.

This third and now final offer has been given provisional approval by the Origin board and if successful, it would rank as one of the biggest private equity-backed takeovers of an Australian company and according to Refinitiv data, it would be one of the largest deals the country has seen this year.

The deal, which is still subject to approval from the Australian Competition and consumer Commission (ACCC), as well as the Foreign Investment Review Board (FIRB), is said to be a standout offer, according to experts.

"It's a knockout offer in terms of price, a 55% premium," said Andy Forster, senior investment officer at Argo Investments in a note.

Brookfield Asset Management (BAM) share price chart 

Forster added: "There's a bit of uncertainty around government intervention and what that means in terms of energy markets. It's a short-term uncertainty - but they're obviously taking a long-term view."

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The deal requires Australian Competition and Consumer Commission (ACCC) and Foreign Investment Review Board (FIRB) approval to proceed.

But analysts at Credit Suisse (CS) believe this could be a difficult takeover, Origin’s share price is currently trading at $7, a discount to the offer price, and the market seems to have priced in this uncertainty.

“Foreign Investment Review Board hurdles loom large for proposed acquisitions of this nature, and the Government could use its approvals leverage to extract concessions on domestic gas prices,” an analyst at Credit Suisse said.

So, here are the details in full and what shareholders can expect from the takeover.

Credit Suisse (CS) share price chart

What will happen to the Origin (ORGau) dividend?

“The price payable under the Indicative Proposal would be reduced by the amount of any dividend paid by Origin prior to implementation of the proposed scheme of arrangement, however, if implementation occurs later than 15 May 2023, the offer price under the Indicative Proposal would then increase by $0.03 per month,” An Origin statement said.

What will happen to Origin (ORGau) once the takeover is complete?

If the deal goes through, the business may be split, with Brookfield (BAM) planning to invest AUD 20bn to help Origin’s transition to renewable energy by 2030.

When will the deal be complete?

At present no date has been given for completion of the takeover.

How will this affect shareholders?

“At this stage, shareholders do not need to take any action. The Board will continue to update shareholders,” a company statement said.

Markets in this article

ORGau
Origin Energy Limited
10.762 USD
0.05 +0.470%
BAM
Brookfield Corporation
46.32 USD
-0.35 -0.750%

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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