Suitor warns green push will sink Origin shares as takeover enters final phase

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Origin Energy’s shareholders have been warned the takeover target’s shares will pay a heavy price for a planned multibillion-dollar renewable energy transition if they vote down the $20 billion bid from Brookfield/EIG.

The warning to shareholders comes as they prepare to vote on the deal next week, with Origin’s biggest shareholder, AustralianSuper, on track to vote its 15 per cent stake against the proposal.

Origin says the sweetened offer fully reflects its assets and its “strategic positioning for the energy transition”.Credit: Bloomberg

“For Origin to do what it expects to do as part of its business plan, it’s going to need to cut dividends or it’s going to need to raise capital, and that’ll be dilutive to shareholders,” Brookfield’s head of renewable power and transition group in Australia, Luke Edwards, said.

Edwards’ unit would take charge of Origin’s retail and power generation assets and use Brookfield’s deep pockets to invest up to $30 billion in renewables – far exceeding Origin’s own plans if it remains listed.

He said while Origin’s renewables plan resonates with many investors, the plan needs enormous capital investment and the Brookfield/EIG offer ($9.53 per share cash) is at a hefty premium.

“This is the best premium on a deal over $3 billion market cap in the last 10 years. And voting yes to this deal will be a catalyst for the acceleration of Australia’s energy transition,” Edwards said.

Brookfield/EIG hope the share price warning and sweet premium will entice Origin’s 122,000 shareholders to overcome the resistance from AustralianSuper.

For the bid to succeed, the suitors need 75 per cent of votes cast at the meeting. With average turnout for scheme votes usually around the 60 per cent mark, AustralianSuper could knock out the bid with no further support, as its 15 per cent stake would represent 25 per cent of shares voted.

The bidders need to lift shareholder turnout significantly and ensure almost all remaining shareholders back their offer.

The market is betting against Brookfield/EIG getting their way, with Origin’s shares closing at just $8.65 – a significant discount to the bid price.

Marc Stanghieri, head of M&A and activism at Morrow Sodali – which is being used by the bidders for their campaign – said retail shareholder engagement typically lifts when there is corporate activity like this.

“In the case of the upcoming Origin scheme meeting, we are observing a very engaged retail shareholder base, and we expect to continue to see a very strong uplift in shareholder votes as we head towards the proxy voting deadline on November 21,” he said.

AustralianSuper has made it clear it will not change its mind on the deal. While the super fund giant has not offered its own valuation, market speculation has suggested $12 a share would be closer to the mark.

“The offer from the consortium remains substantially below our estimate of Origin’s long-term value,” it said last week after lifting its stake above 15 per cent.

”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, whether public or private.”

All eyes will be on AustralianSuper this week to see if it acquires more shares to further scuttle the Brookfield/EIG bid. The super fund could lift its stake in Origin to 19.9 per cent before it would be forced to launch a takeover.

If the bid fails, Brookfield/EIG have floated a plan B that involves an off-market takeover bid at a lower price, which will deliver more than 50 per cent ownership and control of Origin to the consortium.

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