Origin Energy Bidder Doesn’t Know How Much Largest Shareholder Wants
AustralianSuper, which owns about 17% of Origin, has consistently opposed a deal
SYDNEY—The consortium bidding to acquire Origin Energy ORG -0.35%decrease; red down pointing triangle for nearly US$11 billion still doesn’t know what price the Australian power company’s biggest shareholder wants to get a deal done, despite spending more than a year trying to win its support.
The lack of engagement with AustralianSuper prompted the bid group, led by Brookfield Asset Management, to start focusing on a backup offer for Origin that requires the support of fewer shareholders, EIG Global Energy Partners CEO R. Blair Thomas told The Wall Street Journal.
Details of that backup proposal by Brookfield and EIG’s MidOcean Energy unit were outlined by Origin last week. Their first offer remains live: Origin would be taken over and then broken up so that its liquefied natural gas interests would be owned by MidOcean, while Brookfield and Singapore sovereign-wealth funds Temasek and GIC would own the remaining energy markets assets.
Now, however, there is a second proposal given the likelihood that the first proposal fails to gather the support of shareholders owning 75% of Origin’s stock at a Dec. 4 meeting.
This second proposal involves Origin selling its generation and retail assets to Brookfield as a first step. Only later would EIG buy the slimmed-down Origin and its gas-production business.
AustralianSuper, which owns about 17% of Origin, has consistently opposed a deal. It says the bid group’s best-and-final price of 9.43 Australian dollars per share, equivalent to US$6.21, is too low given Origin’s assets and potential role in Australia’s energy transition. The pension fund also rebuffed an opportunity to retain an investment in Origin as an unlisted company once it was taken private by the consortium.
In an interview Monday, Thomas said AustralianSuper’s public rejection of that chance to join the consortium without any behind-the-scenes engagement was a “lightbulb moment” that led to the group pivoting toward its new approach.
“Brookfield bent over backwards and sent a letter to AustralianSuper offering one more time to try to engage, and AustralianSuper rejected it and released a letter without ever speaking to them,” Thomas said. “That was when it was obvious to me that this was just a waste of time.”
Thomas said that AustralianSuper’s Nov. 13 statement that it wouldn’t discuss taking a post-takeover interest in Origin marked the point at which the consortium began to more tightly focus on its so-called Plan B. AustralianSuper which is the country’s largest superannuation fund with about A$300 billion in assets under management, declined to comment.
“Up until then, we had spent the better part of a year thinking it was just a matter of time until we got engagement and we would reach some commercial understanding,” Thomas said.
In its earlier public statements, AustralianSuper has indicated that it wants to remain invested for the long term. It has steadily increased its stake from less than 13% in March, which was when Origin agreed to back a takeover.
Origin is Australia’s fourth-largest emitter of greenhouse gasses because much of the electricity that it generates comes from plants that burn thermal coal. But its retail brand, assets, and grid connectivity make it an appealing target for investors seeking to bet on the energy transition.
Brookfield says it wants to accelerate Origin’s investment in renewables and storage assets. It said it would spend between A$20 billion and A$30 billion building out Origin’s renewables and storage assets over the decade to 2033, far outstripping Origin’s suggestion of a more than A$3 billion investment. Brookfield says opposition to the bid, which it views as compelling, is limited to a handful of shareholders.
“I can’t tell you exactly what it is they want,” Thomas said of AustralianSuper. “They haven’t told us exactly what would get them to say ‘yes’. They haven’t told us what they think fair value is. They haven’t shared any of their analysis.”
The Origin board is considering the backup offer, which last week it said appears inferior.
“These things are jigsaw puzzles,” Thomas said. “I wouldn’t expect there to be wholesale changes but I do think there are some things around the margin that we can do that would make it more attractive for the board.”