The $18.7 billion Canadian-US bid for Origin Energy (ASX:ORG) appears to be in jeopardy and may require a higher offer price, as Origin’s largest shareholder, AustralianSuper, has rejected the current deal.
AustralianSuper, which owns 13.7% of Origin, has indicated its intention to decline the offer from the Canadian infrastructure giant Brookfield and US energy investor EIG.
“AustralianSuper believes the ongoing energy transition, as we move towards net zero by 2050, has further enhanced the value of strategic energy transition platforms, such as Origin,” stated AustralianSuper in a Tuesday announcement.
Brookfield and EIG, through their subsidiary Mid-Ocean, have offered $8.912 for each Origin share. However, Origin shares have consistently traded above this offer price, with investors expecting an improved bid.
Market analysts suggest that AustralianSuper’s position is supported by several smaller shareholders among fund managers, increasing the risk that the deal may not secure the necessary 75% approval at a shareholder meeting next month.
Following the news from AustralianSuper, Origin Energy shares briefly dipped to $9.10 at 10:20 am on Tuesday, as investors speculated about the deal’s status. However, the shares later stabilized and rose to around $9.12 by 11:30 am.
AustralianSuper emphasized its belief in Origin’s strategic portfolio of assets in the energy transition towards renewables. The fund highlighted that Origin has the potential to become Australia’s leading energy supplier, drawing lessons from its 20% shareholding in UK-based Octopus Energy, a fast-growing renewable energy-focused provider.
Additionally, through APLNG (the Queensland LNG project), Origin is well-positioned to access gas for its Energy Markets business and benefit from strong global demand for LNG.
AustralianSuper’s confidence in Origin was evident as it increased its stake in the company by 1.02%, becoming the company’s largest shareholder with a total shareholding of 13.67%.
In its September quarter production report, Origin Energy reported steady production in its integrated gas business, driven by increased well activity. However, Australia Pacific LNG revenue was lower due to seasonal factors and lower LNG prices. The Energy Markets business saw a decline in electricity and natural gas sales volumes due to weather conditions and energy efficiency.