Origin Energy top investor rejects fresh Brookfield $10.5 billion bid, shares fall

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Miniatures of windmill, solar panel and electric pole are seen in front of Brookfield Renewable logo in this illustration taken January 17, 2023. REUTERS/Dado Ruvic/Illustration/File Photo Acquire Licensing Rights

  • Largest shareholder rejects 'best and final' bid
  • Origin shares fall as much as 5.6%
  • Brookfield bid was final in absence of a rival offer
  • If bid fails Brookfield could go off-market route

SYDNEY, Nov 2 (Reuters) - Origin Energy's largest shareholder said it would vote against a Brookfield consortium's "best and final" A$16.40 billion ($10.55 billion) takeover offer, making it challenging for the bidder to win control of Australia's biggest energy retailer.

The nation's largest pension fund AustralianSuper said on Thursday the consortium's A$9.53 per share offer, an 8% increase over the previous A$8.81 apiece bid, remained "substantially below" its estimate of Origin's long-term value.

"AustralianSuper believes Origin has a highly strategic portfolio of assets to participate in, and benefit from, the energy transition," a spokesperson said.

Origin shares plunged as much as 5.6% to A$8.565 in high-volume trading following the news, as AustralianSuper's 13.68% holding could scupper a deal that requires approval from 75% of the register if not all investors vote.

AustralianSuper's stand illustrates the power of a homegrown pension sector in a market where A$2.4 trillion in professionally managed retirement assets are on par with the value of the local bourse.

Hours earlier, the consortium led by Canada's Brookfield (BAM.TO), which also includes EIG's MidOcean Energy, said the increased offer was its "best and final" proposal, meaning it cannot be increased unless a rival offer emerged.

Brookfield was not immediately available for comment after AustralianSuper's announcement.

AustralianSuper, which manages A$300 billion in assets, on Tuesday had already rejected the prior offer, saying it was "substantially below" its estimate of long-term value as the country moves toward net-zero emissions by 2050.

The offer is above the $A8.45 to A$9.48 per share valuation range contained in an independent expert's report examining the previous offer, though that outlined a "roll forward" calculation that shares could be worth an additional 40 Australian cents by the time the takeover is due to close.

"If AustralianSuper is rejecting it, the likelihood of the deal going ahead is very low," said Jamie Hannah, deputy head of investments and capital markets at VanEck, which owns a 0.3% stake in Origin. "I think the deal is back at the drawing board at the moment."

Should the deal fail at the shareholder vote scheduled for Nov. 23, a revised agreement allows the consortium to make a subsequent off-market bid if it buys 5% or more of Origin shares. That route only requires 50.1% shareholder support, offering the buyers a way to bypass opposition.

Simon Mawhinney, managing director of fund manager Allan Gray which owns about 3% of Origin shares, supported the fresh offer but said the opposition would likely scupper the deal, potentially opening the way for the off-market route.

"If it gets voted down, Brookfield aren't obligated to come back with an off-market takeover offer, but they may be inclined to," he said.

The rejection put AustralianSuper at odds with Origin's board, which said on Thursday it unanimously recommended the deal barring a stronger rival bid.

Brookfield pitched its renewed offer as vital for speeding up Australia's transition to renewable energy, a stance the country's competition regulator agreed with when it approved the deal last month.

Brookfield Asia Pacific CEO Stewart Upson said the consortium planned to invest $A20 billion to A$30 billion in Origin over the next decade and build more renewable capacity than the company would otherwise.

Should the deal close, Brookfield and its partners GIC and Temasek will own Origin's Energy Markets business, which includes power generation and retailing. MidOcean, in which Saudi Arabia's Aramco recently bought a stake, would take over the integrated gas business, including the 27.5% stake in the Australia Pacific LNG project.

($1 = 1.5640 Australian dollars)

Reporting by Scott Murdoch and Lewis Jackson in Sydney; additional reporting by Sameer Manekar in Bengaluru; Editing by Jamie Freed

Our Standards: The Thomson Reuters Trust Principles.

Scott Murdoch has been a journalist for more than two decades working for Thomson Reuters and News Corp in Australia. He has specialised in financial journalism for most of his career and covers equity and debt capital markets across Asia and Australian M&A. He is based in Sydney.

Reports on breaking news in Australia and New Zealand covering the biggest stories across politics, companies and commodities. Previously wrote about equities at Morningstar.

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