Origin shareholders reject Brookfield EIG takeover

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Australia’s largest super fund and other shareholders of Origin Energy have dealt a fatal blow to Brookfield and EIG after 13 months of corporate drama, rejecting a multibillion-dollar bid by the consortium to break up and privatise Australia’s largest energy provider.

Despite strenuous efforts by Origin’s board and the North American consortium to garner enough support, Origin’s shareholders, at a Monday scheme meeting in Sydney’s Shangri-La Hotel, rejected the $9.39-a-share “best and final” offer lobbed by the suitors.

Shareholders at Origin’s takeover meeting voted on Brookfield and EIG’s $9.43-a-share “best and final” offer.Credit: Bloomberg

Market sentiment turned sharply against Origin during morning trade as investors sniffed the wind, pushing the company’s stock 4 per cent below its previous close of $8.10 to around $7.85, before its shares were placed in a temporary trading halt.

The bid’s failure follows multiple twists and turns in the country’s largest and lengthiest recent takeover tussle. Its rejection was widely expected after Origin’s largest shareholder AustralianSuper labelled the offer “low-ball” and repeatedly stated it would pitch its 17 per cent stake against it.

Australian takeover rules require 75 per cent of votes cast at scheme meetings to back an offer for it to succeed, but typically only about 60 per cent of shareholders vote or appoint proxies – a rule investors, Origin’s board and the consortium knew would give the super fund giant an oversized influence on the outcome.

At one stage, Brookfield and EIG courted AustralianSuper – which manages almost $300 billion for 3.2 million members – sending it a letter outlining terms that would give it a seat at the transaction table. The pitch was swiftly rejected by the super fund.

The 390-day scramble for control of the energy giant saw former prime minister Paul Keating blast the takeover as a private equity “get rich quick” scheme, Australia’s competition watchdog back it because of its energy transition benefits, and a frantic 11th-hour effort by the consortium to get the board’s support – unsuccessfully – for an alternative Plan B proposal.

The original scheme vote was adjourned on November 21 to give the board time to assess the revised proposal but, despite rejecting Plan B, the board continued to recommend shareholders vote in favour of the original scheme.

Canadian private equity fund Brookfield and its US-based energy investor partner, EIG, said last Friday that they would “respect” the Origin board’s decision not to back their Plan B, a proposal they hastily put to the board two weeks ago as support for the takeover teetered on a knife edge.

Plan B sought to gain shareholder approval – in the event the original takeover failed – for EIG to buy a controlling 50.1 per cent stake in Origin for between $9.08 and $9.33 a share, giving it Origin’s Australia Pacific LNG business while Brookfield paid $12.3 billion for the company’s energy market assets.

The proposal was rejected by the board last Thursday as “incomplete, complex and highly conditional,” leaving shareholders with just one option – to vote on the “best and final” offer.

Luke Edwards, Brookfield’s Australian head of renewable energy and transition, said the consortium will examine the Albanese government’s taxpayer-backed expansion of the capacity investment scheme before deciding whether it will pursue Origin further.

The beefed-up capacity investment scheme will underwrite 32 gigawatts of new renewable energy and storage over the next four years in an effort to hasten the rollout of renewables, firm up the power grid as ageing coal plants retire, and push the country along the path of meeting the government’s goal of renewables supplying 82 per cent of power by 2030.

Australia’s east coast electricity market currently has about 64 gigawatts of installed capacity.

Brookfield’s bid included a 10-year plan to invest up to $30 billion in renewables. “This [government] intervention negatively impacts our view on the value of Origin energy markets,” Edwards said.

The ACCC approved the consortium’s takeover in October, saying Brookfield’s proposed investment of between $20 billion and $30 billion to accelerate the rollout of renewable energy projects would lead to a more rapid reduction in Australia’s greenhouse gas emissions.

Origin’s power generation and retailing division supplies about 4.5 million customer accounts and its Australia Pacific LNG business exports liquefied natural gas.

The total value of Brookfield and EIG’s offer, currently worth about $16 billion, has fluctuated over time because it is partly linked to US currency exchange rates. The high-stakes takeover began last November, when the electricity retailer opened its books to its suitors after they lobbed a surprise $9-a-share bid to buy the company and divide its assets between them.

Origin’s board eventually accepted an $8.91-a-share offer in a deal structured to increase the bid price by 4.5¢ a month if the completion was delayed beyond November 30 this year, initially valuing Origin at $18.7 billion, including debt.

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