Origin Energy (ASX: ORG) has today accepted an $18.7 billion takeover deal from a consortium led by Canada-based asset manager Brookfield, which has pledged to invest billions of dollars to accelerate the decarbonisation of its target.
Under the agreement, Brookfield will acquire Origin’s energy markets business while US-based MidOcean - an LNG company formed and managed by EIG – will take partial control of the integrated gas business Australia Pacific LNG (APLNG).
It comes more than four months after Origin announced it had received a $9 per share takeover proposal from the consortium, which was revised four weeks ago and trimmed down to $8.90.
Further discussions between Origin and its suitors refined the bid price, now comprising $5.78 per share and USD$3.19 per share for all shareholders, or $8.912 per share. This represents a 9.1 per cent premium to Origin’s last close of $8.17 per share on 27 March and a 53.4 per cent premium compared to $5.81 per share on 9 November 2022 - the last trading day prior to the initial proposal by the consortium.
MidOcean, which will own 27.5 per cent of APLNG, has also made an agreement with ConocoPhillips – already a 47.5 per cent owner – to sell it a 2.49 per cent stake in the company.
Brookfield has enlisted Singaporean funds GIC and Temasek to back their bid and become co-investors, on top of working with India-based Reliance Industries to assess areas of collaboration in renewable energy in relation to the deal.
“We believe this transaction is a great outcome not only for our shareholders, but for all stakeholders including our customers, employees and partners,” Origin Energy CEO Frank Calabria said.
“We believe this transaction also stands to benefit the broader Australian community as it will unlock significant capital that can help accelerate the energy transition and deliver benefits in the form of cleaner, smarter and lower-cost energy for our nation over time.”
Brookfield’s business plan contemplates pumping at least $20 billion of additional investment over the next decade into Origin to construct up to 14 gigawatts (GW) of new renewable generation and storage facilities in Australia.
The asset manager expects the transition would allow Eraring, one of the nation’s largest coal-fired power stations located on the shores Lake Macquarie, to retire.
The deal with Origin comes more than a year after Brookfield’s $5 billion bid for energy giant AGL (ASX: AGL), made alongside Mike Cannon-Brookes’ Grok Ventures, fell apart.
“The acquisition of Origin Energy presents Brookfield with a unique opportunity to invest at least $20 billion and make a material difference to achieving Australia’s net zero targets,” Brookfield Asia Pacific CEO Stewart Upson said.
“We will build on the success of our global renewable power and transition business where we have a mandate to ‘go where the emissions are’ in putting billions of dollars behind an executable plan to reduce emissions at Origin.”
Completion of the takeover is conditional on the support of Origin shareholders and regulatory approvals from the Australian Competition and Consumer Commission (ACCC) and Australia’s Foreign Investment Review Board (FIB).
Origin Energy’s board has encouraged investors to support the bid.
“The board is unanimous in its view that this transaction is in the best interests of shareholders,” Origin Energy chairman Scott Perkins said.
“The transaction represents a significant premium to the share price prior to the original indicative proposal, and reflects the strategic nature of Origin’s platform, its growth prospects and anticipated earnings recovery.”
Origin Energy and the consortium are targeting implementation of the scheme by early calendar 2024.
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