Brookfield-led ‘final’ bid for Australian energy giant rebuffed by largest shareholder

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A “best and final” offer from a Brookfield-led consortium to take over Australia’s largest energy provider has been immediately rebuffed by the target’s biggest shareholder, putting the A$19.4bn ($12.5bn) deal in the balance.

The future of Origin Energy, which has 4.2mn retail customers and a stake in a large offshore gas project, will now be determined on November 23, when shareholders will vote on the new offer. It was pitched at a 70 per cent premium to the share price of the company a year ago when the bid was first made.

The 8 per cent increase in the bid came after AustralianSuper, the country’s largest pension fund and biggest Origin shareholder, with a 13.67 per cent stake, said this week it would vote against what was on the table. The fund then said on Thursday the new offer was still “substantially below” its view of the energy company’s long-term intrinsic value.

Origin shares fell more than 6 per cent to A$8.49 on Thursday as investors bet that the deal would fail.

The takeover is an acid test for the country’s energy transition. Canadian asset manager Brookfield, which teamed up with US firm EIG to buy Origin with a view to splitting it up, has maintained the takeover means it would invest between A$20bn and A$30bn over the next decade in Australia’s move away from fossil fuels.

Brookfield argues that private capital is needed for the country to rapidly reduce its reliance on coal-fired power plants for electricity if it is to meet its net zero targets. They include a commitment to source 80 per cent of electricity from renewable sources by 2030.

The takeover has already received regulatory approval and has been championed by Mark Carney, the former Bank of England governor, who is co-head of Brookfield’s Global Transition Fund. 

The rising value of Origin shares over the past year, partly driven by the growth of UK supplier Octopus Energy, in which it holds a 20 per cent stake, has put pressure on Brookfield and EIG, which intends to take the gas assets, to raise their offer.

They have now added A$1.2bn in cash to the bid, which they describe as a “best and final” offer. It is pitched at A$9.53 a share — above an independent valuation of Origin’s assets and potential conducted this year.

Origin’s board has recommended acceptance, with the deal giving the company an enterprise value of A$19.4bn, which includes $2.9bn of net debt.

Simon Mawhinney, chief investment officer at Allan Gray Australia, which owns a 3.5 per cent stake in Origin, said his fund would vote in favour. “I think the consortium has made a reasonable offer here. It strikes the right balance between risks and opportunities for the company,” he told the Financial Times.

Brookfield and EIG need 75 per cent of shareholders to back its bid as the takeover has been structured as a scheme of arrangement. However, the consortium inserted a new clause into the improved offer that would allow it to make an off-market takeover bid for Origin within three months of an acquisition of a 5 per cent stake in the company.

Such a move would lower the threshold of acceptance for a deal to 50.1 per cent.