The board of Origin Energy (ASX: ORG) appears likely to reject an eleventh-hour Plan B acquisition offer from global investment firm Brookfield and US oil and gas private equity firm EIG.
Origin’s directors are believed to be unconvinced that the alternative deal would be any better for shareholders than the $18.7 billion scheme of arrangement deal they agreed to in April, and which was more recently revised to a value of close to $20 billion. The company’s largest shareholder, AustralianSuper, remains opposed to that deal.
The alternative offer was received by Origin on the evening of 22 November, with shareholders due to vote on the existing deal the following afternoon. Origin decided to go ahead with the meeting but then adjourn it until 4 December for its board to fully consider the alternative offer.
But the company said the alternative proposal “appears inferior”.
If the Origin board rejects the alternative offer, shareholders will vote on the existing proposal on 4 December with AustralianSuper expected to vote its now 17% stake against the deal.
If the Origin board were to accept the revised proposal and conditionally recommend shareholders to vote in favour of that, pre-vote processes would need to be completed again meaning that a date for a vote would need to be set for the new year.
While AustralianSuper’s opposition to the existing $9.43-a-share cash deal means it would likely fail in a vote, industry super fund Australian Retirement Trust (ART), which holds a 1.6% stake, has said it will vote in favour. A 75% vote in favour will be required for the scheme of arrangement deal to succeed.
The alternative offer is a complicated two-part deal involving Brookfield buying Origin’s energy markets business, including its stake in UK energy retailer Octopus Energy, for $12.3 billion “conditional on approval by Origin shareholders through an ordinary resolution” with a subsequent off-market takeover offer by EIG for Origin, subject to a 50.1 % minimum acceptance condition.
Origin said if EIG reaches acceptances of at least 90% for its takeover then shareholders will receive an additional 22 cents per share cash but will not receive 35 cents per share of franking credits attached to a dividend arising from the energy markets sale proceeds. The would result in a total cash payment of approximately $9.30 per share.
Origin said: “There are a range of conditions attached to the revised proposal including finalising amendments to the consortium’s funding arrangements, updates to regulatory approvals and entry into revised legal documentation.
“While the alternative transaction may present an additional opportunity for shareholders to receive cash value for their shares, the board notes that the transaction appears inferior to the existing scheme.”
Nevertheless, Origin said, the board had a responsibility to fully assess the revised proposal to provide an informed view to shareholders.
Disclosure: The writer holds shares in Brookfield and is an AustralianSuper fund member.