Australia’s Origin Energy said on Wednesday a Brookfield-led consortium had trimmed its takeover bid to A$8.90 per share from A$9, valuing the company at A$15.33 billion ($10.50 billion).
The parties did not spell out the reason for the drop in price. Australian gas firms have seen their valuations hit by the government’s planned 12-month cap on gas and coal prices to keep a lid on bills for households and businesses hit by soaring global energy prices following Russia’s invasion of Ukraine.
The previous offer tabled in November at the higher price valued Origin at A$15.5 billion.
Origin shares rose 13% to $7.90 in early trade Wednesday, in a broader market down 0.9%.
The stock has traded well below the original offer price and on Tuesday closed at A$7.01 as investors speculated a deal might not go ahead.
“We are still positive on this deal,” said Andy Forster, senior investment officer at Argo Investments, which is Origin’s ninth largest shareholder. “It’s only a small reduction in terms of value following the government intervention with the gas price caps.”
The Origin board stopped short of delivering a recommendation of support for the bid, which is one of the conditions needed for the Brookfield offer to proceed.
“The Origin board considers the revised proposal has the potential to deliver significant value to shareholders, and accordingly, intends to continue to progress discussions with the consortium,” the energy retailer said.
The Australian government announced in December gas prices for new wholesale gas sales by east coast producers would be capped at A$12 per gigajoule for a year.
Gas producers said the caps could deter future investment in supply, which would be key to driving down prices in the long run, and could damage Australia’s reputation for foreign investors.
Under the plan, Brookfield Asset Management would acquire Origin’s energy markets business, while MidOcean Energy, the other consortium partner which is backed by energy investment firm EIG, would take control of Origin’s integrated gas business, including its 27.5% stake in Australia Pacific LNG (APLNG).
Origin has been looking to speed up its transition to cleaner energy, accelerating the planned shutdown of the country’s biggest coal-fired power plant and selling its gas exploration assets.
“Brookfield is committed to investing in the energy transition in Australia and we see Origin playing a leading role in helping Australia meet its legislated climate and energy goals,” Brookfield Asia Pacific chief executive Stewart Upson said in a statement.
The revised offer comprises A$8.90 apiece for the first 100,000 Origin shares. For any stake above, shareholders will receive a combination of A$4.334 and a U.S. dollar payment of $3.194 per share that reflects Origin’s interest in APLNG that pays dividends in U.S. dollars.
Almost 75% of Origin’s shareholders own fewer than 100,000 shares, according to its most recent annual report.
Brookfield‘s deal requires Australian Competition and Consumer Commission (ACCC) and Foreign Investment Review Board (FIRB) approval to proceed.
Reuters