Origin Energy announced it had received an indicative, conditional, and non-binding offer from Brookfield Asset Management Inc.
In a statement, Origin said Brookfield, along with its associates and their managed funds, as well as LNG company MidOcean Energy, aims to buy all of Origin’s outstanding shares under a plan of arrangement for $9.00 in cash per share.
If Origin paid a dividend before the proposed scheme of arrangement went into effect, the price payable under the indicative proposal would be lowered by that amount. If, however, the proposed scheme of arrangement goes into effect after 15 May 2023, the price payable under the indicative proposal would rise by $0.03 per month.
The Indicative Proposal follows a prior indicative proposal from the Consortium to purchase Origin on 8 August 2022 for $7.95 in cash per share, equivalent to $7.79 in cash per Origin share after the declaration and payment of the H2 2022 dividend of 16.5 cents per share. The Consortium again offered to buy Origin on 18 September 2022, with a suggested price range of $8.70 to $8.90 per share.
Origin’s Board began a period of limited dialogues and information sharing with the Consortium after signing a confidentiality agreement containing customary disclosure restrictions and standstills to address some conditions and determine whether the Consortium could develop a proposal that was likely to be in the best interests of Origin shareholders. According to Origin, this was done in light of the preliminary and highly conditional nature of these initial indicative proposals.
After that engagement, the Consortium filed the Indicative Proposal, representing an increase of 16 per cent above its previous proposal and at a premium to Origin’s most recent trading share price (as of 9 November 2022) of:
- 54.9 per cent of the $5.81 per share closing price on 9 November 2022;
- 60.6 per cent to the one-month volume weighted average price (VWAP) of $5.60 per share on 9 November 2022; and
- On 9 November 2022, the three-month VWAP of $5.76 per share is up 56.3 per cent.
According to the Consortium’s Indicative Proposal, Brookfield would eventually purchase Origin’s Energy Markets business, while MidOcean would acquire the Integrated Gas company.
Origin has engaged in a confidentiality and exclusivity agreement with the Consortium after considering all relevant factors. The agreement provides that any party may cancel the exclusivity conditions after five weeks and four days with one week’s notice. Origin said its Board wishes to give the Consortium a chance to perform due diligence before submitting a formal proposal. Due diligence is projected to take eight weeks to complete. Suppose Origin receives any offers that its Board believes may result in a better outcome for Origin shareholders. In that case, those proposals will be examined in accordance with the exclusivity provisions and the Board’s fiduciary responsibility.
Based on current information and market conditions, Origin Board aims to unanimously propose that shareholders vote in favour of the proposal if the Consortium makes a binding offer at $9.00 cash per share in the absence of a superior proposal. This is conditional on the parties agreeing to a legally enforceable scheme implementation agreement on conditions acceptable to Origin. It is also contingent on an independent expert determining (and continuing to determine) that the proposed transaction is fair, reasonable, and in the best interests of Origin shareholders.
Several requirements apply to the Indicative Proposal, including:
- the Consortium having completed enough due diligence;
- agreement and execution of a binding scheme implementation agreement, subject to several criteria, including clearances from the Australian Competition and Consumer Commission and the Foreign Investment Review Board; and
- the unanimity of the Origin Board in favour of the shareholders’ approval of the Indicative Proposal (in the absence of a superior offer and subject to an independent expert report concluding that the Indicative Proposal is in the best interests of Origin shareholders).
“This proposal confirms that Origin, its operations and management team represent a highly strategic platform, wellplaced to benefit from the energy transition. Our confidence in Origin’s prospects underscored our engagement with the Consortium and delivered a material increase on their initial offer. While the due diligence process advances, we will remain focussed on the successful execution of our strategy,” Origin Chairman Scott Perkins said.
Origin CEO Frank Calabria commented: “Over the past year, Origin has executed a number of important strategic initiatives that have strengthened the balance sheet, sharpened our strategic focus and positioned the company to prosper from the energy transition. At the same time, we have a dedicated, engaged and highly-skilled workforce who are committed to delivering good outcomes for our customers and communities. We believe Origin is in a strong position to lead the energy transition, capture opportunities and create value for shareholders.”
According to Origin, the Board observes that it is still being determined whether the Indicative Proposal and engagement between Origin and the Consortium will result in a legally binding proposal that shareholders can consider.
