Power and gas supplier Origin Energy has agreed to extend the deadline for its two North American suitors to finalise their joint $18.4 billion offer to buy the company and divide up its assets between them.
Origin Energy, one of the largest Australian electricity and gas companies, last year opened its books to a consortium of Canadian asset manager Brookfield and US-based private equity firm EIG, which lobbed a $9-a-share takeover offer.
Under the proposal, EIG is seeking to buy Origin’s 27.5 per cent interest in the Australia Pacific LNG liquefied natural gas venture in Queensland. Brookfield wants Origin’s domestic energy generation and retail division, and has outlined ambitious plans to invest another $20 billion to accelerate its roll-out of renewables in the hope of transforming the company into Australia’s largest clean energy owner by the end of the decade.
Origin had previously granted the bidders an extension on their exclusive period in the data room to conduct due diligence before signing a binding deal. On Tuesday morning, Origin said it had agreed to extend it again by another week to January 24.
“The consortium has advised that it is working to complete its due diligence and has requested additional time to do so,” the company said.
Representing nearly a 55 per cent premium on the stock’s previous closing price, the Origin Energy takeover proposal is expected to have a high chance of succeeding, with Origin’s board intending to recommend shareholders back the deal when it is put to a vote.
However, analysts in December raised doubts about the fate of the blockbuster takeover after the Albanese government unveiled an emergency package to tame soaring east coast energy bills, including through the introduction of a $12-a-gigajoule cap on uncontracted domestic gas sales for 12 months.
The price caps, in addition to a new mandatory code of conduct to ensure “reasonable” gas-supply contract prices beyond this year, will affect domestic sales from Origin’s APLNG and raised speculation it could trigger a revaluation of the company.
However, in a statement on December 22, Origin said it had been notified by the bidding consortium that it had had “not identified any adverse material matters to date”.
Macquarie analyst Ian Myles said concerns that a takeover deal might fall over because of the government’s gas price intervention “appear misplaced, in our view”.
“The risk of delay in the transaction due to government intervention may also be misplaced, though there are still Foreign Investment Review Board and Australian Competition and Consumer Commission hurdles,” he said.
Myles added that an agreement between state and federal government to set a temporary $125-a-tonne cap on the price of domestic coal would also benefit Origin when it recontracts coal supplies for its Eraring power station in NSW in 2024.
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Source: Thanks smh.com