Origin Energy agrees $10.2 billion takeover deal with Brookfield consortium

By and
  • Premium of 9.1% to last close
  • GIC and Temasek become co investors
  • Implied offer value of A$8.912 per share

March 27 (Reuters) - Australia's Origin Energy Ltd (ORG.AX) on Monday agreed a A$15.35 billion ($10.21 billion) takeover offer from a consortium led by Canada's Brookfield (BAM.TO), nearing the conclusion of one of the biggest private equity-backed buyouts in the country announced last year.

Once the deal is finalised, Origin will be broken up into two businesses – Energy Markets business to be acquired by Brookfield; while EIG's MidOcean Energy, the other consortium partner, would take control of Origin's integrated gas business.

Brookfield has enlisted Singaporean funds GIC and Temasek (TEM.UL) to back their bid and become co-investors, according to a statement published on Monday.

MidOcean Energy, which will gain control of Origin's 27.5% stake in Australia Pacific LNG (APLNG), has reached an agreement with ConocoPhillips (COP.N) to sell it a 2.49% stake in the project, Origin said in a statement.

Under the scheme, Origin shareholders would receive an implied offer price of A$8.912 per share, representing an enterprise value of A$18.70 billion and a 9.1% premium to Origin's last close of A$8.17.

The implied offer value is slightly higher than the A$8.90 per share bid tabled on Feb. 22 after the offer composition was tweaked to A$5.78 per share and $2.19 per share in cash. Under the previous offer outlined last year, investors would have received payment in Australian dollar for up to 100,000 shares held but all will now be paid in both currencies.

The Origin board encouraged its investors to support the bid.

"The board is unanimous in its view that this transaction is in the best interests of shareholders," Origin Chairman Scott Perkins said.

"Our discussions with the consortium confirm a high degree of alignment with Origin's strategy and a desire to accelerate initiatives consistent with Origin's critical role in Australia's energy transition."

Origin and the consortium are targeting implementation of the scheme by early calendar 2024.

If the deal is approved, EIG's MidOcean Energy will take on Origin's gas business, including the lucrative stake in APLNG.

"LNG will be critical in delivering energy transition targets, and this transaction is a compelling opportunity to accelerate EIG’s strategy of gaining exposure to high quality LNG assets around the globe," EIG CEO Blair Thomas said on Monday.

EIG has been eyeing the APLNG stake having been thwarted in a $10.8 billion bid for Santos Ltd in 2018, aiming to create a global LNG company targeting customers in Japan, South Korea and China.

APLNG’s appeal lies in its long-term contracts to supply China’s Sinopec and Japan’s Kansai Electric.

ConocoPhillips will now have 49.9% of APLNG and become the upstream operator of the company.

The deal is now subject to approval from Origin shareholders, regulatory approvals, and the issue of an independent expert's report concluding the offer is in best interest of the shareholders, among others.

Origin has agreed to a 'no shop no talk' agreement and Brookfield has the right to match any higher bid which could emerge for the power generator, according to its filings.

($1 = 1.5038 Australian dollars)

Reporting by Sameer Manekar in Bengaluru; Editing by Shailesh Kuber and Louise Heavens

Our Standards: The Thomson Reuters Trust Principles.

Thomson Reuters

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.