Brookfield’s $13bn bid for Origin Energy fails on shareholder vote

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Shareholder opposition has thwarted a multibillion-dollar deal in Australia for the second time in two months, with a takeover bid for the country’s largest energy company being voted down in Sydney on Monday.

Origin Energy shareholders were not won over in enough numbers to clear a $12.7bn offer from a consortium led by Canadian asset management company Brookfield, which intended to buy and break up the business.

After a protracted battle that lasted more than 400 days, only 69 per cent of shares were cast in favour of the deal in a vote at the city’s Shangri-La hotel. Under a scheme of arrangement, a level of 75 per cent was needed for approval.

It is the second big deal to fail due to shareholder resistance in recent weeks, with US lithium miner Albemarle abandoning a A$6.6bn ($4.2bn) bid for Liontown Resources in mid-October after billionaire Gina Rinehart built a large stake in the Australian lithium company.

The result also follows the successful intervention last year by fellow Australian billionaire Mike Cannon-Brookes to block the demerger of Origin’s rival AGL.

Brookfield had planned to use Origin as a vehicle to help lead the country’s transition from coal-powered electricity to renewable energy. Origin, with 4.5mn customers, is one of the largest integrated electricity generating and retail companies in the world. This made it a prime target for Brookfield’s transition fund, led by former Bank Of England governor Mark Carney. Private equity company EIG was to take over offshore gas assets in the break-up of the company.

However, some investors argued that Brookfield was buying the company on the cheap, citing Origin’s rising profitability and the increase in value of its stake in UK energy company Octopus. They said Origin should be able to fund its energy transition as an independent company.

The country’s largest pension fund, AustralianSuper, was Origin’s biggest investor and vehemently opposed the sale, describing the bid as a “low-ball offer”. It raised its stake to 17 per cent to narrow Brookfield’s chances of victory.

The Origin board had recommended approval of the offer, but its chair Scott Perkins said after the vote that the arduous bidding process had not disrupted the company’s momentum and would not change its strategy. “There’s been a contest over value but not a contest over strategy,” he said.

Some shareholders disagreed. Jamie Hannah, deputy head of investments at VanEck, which holds more than 5mn shares and voted in favour of the takeover, said Origin now needed to set “more aggressive targets” for renewable power generation to match the ambition of the group that tried to buy it.

Key to the Brookfield consortium’s plan to take over Origin was a pledge to invest up to A$30bn in renewable energy to transform the country and the company into a leader in the transition to greener energy.

AustralianSuper said it was open to providing capital to assist a transition. Perkins said he welcomed the statement given the scale of the opportunity to invest in renewable energy in Australia.

Brookfield said it would “evaluate its next steps, if any, with respect to Origin, given the strong level of Origin shareholder support for its proposal”.

A person with knowledge of Brookfield’s strategy said there were no immediate plans to rebid for Origin by buying up shares. Brookfield said it would take into account the government’s new renewables stimulus plan, which changes the dynamics of the country’s energy market and the value of existing companies in the sector.

Origin shares closed 4 per cent lower at A$7.86, or 17 per cent below the Brookfield offer.

The meeting, which had been delayed for two weeks after Brookfield revised its offer the night before the vote, took questions from retail investors, many of whom have been shareholders since Origin was created as a spin-off of construction materials company Boral in 2000. 

Michael Ham, who had travelled 10 hours from rural Australia to get to the meeting, said the board had proposed selling off one of the country’s essential services to a foreign buyer and asked why Australia could not fund its own transition. “We’re Aussies, we can do it,” he said. 

Rowan Weir, a Sydney investor, said it was “vital” that Origin stayed in Australian hands, unless the country wanted to end up towards the back of the queue in the energy transition. She danced a jig when the vote failed.