Brookfield makes ‘best and final’ $10.5 billion bid for Australia’s Origin Energy

By Scott Murdoch and Lewis Jackson

SYDNEY (Reuters) -A Brookfield consortium on Thursday lifted its bid for Australian power producer Origin Energy by 8% to A$16.40 billion ($10.49 billion), its “best and final” offer after earlier opposition from the target’s biggest investor.

The consortium led by Canada’s Brookfield, which also includes EIG’s MidOcean Energy, is offering Origin shareholders A$9.53 per share, up from the prior offer of A$8.81 apiece, and a 5.1% premium to its last closing price.

The consortium said the increased offer was its “best and final” proposal, meaning it cannot be increased unless a rival offer emerged.

“The fact that no competing offer has surfaced in nearly a year, together with the massive premium in our proposal, evidences the fact that we have identified every element of value available,” EIG CEO Blair Thomas said in a statement.

Origin shares fell as much as 2.1% to A$8.875 in early high-volume trading amid uncertainty over whether top shareholder AustralianSuper, the country’s biggest pension fund with A$300 billion under management, would back the new price.

AustralianSuper did not immediately respond to a request for comment.

The pension fund on Tuesday had rejected the prior offer, saying it was “substantially below” its estimate of long-term value for Australia’s biggest energy retailer.

The deal requires 75% support from the votes cast at a shareholder meeting, scheduled for Nov. 23, meaning AustralianSuper’s holding in Origin – the biggest at 13.68% – could be enough to scupper it if not all shareholders vote.

Simon Mawhinney, managing director of fund manager Allan Gray which owns about 3% of Origin shares, said his firm intended to accept the sweetened offer.

“It might not be under perfect conditions the most amount that someone could pay, but it’s a fair price and I feel from our perspective and the clients for whom we act that this is reasonable,” he said.

Origin’s board said it unanimously recommended shareholders vote in favour of the revised deal in the absence of a superior proposal.

The bid is made up of two currencies, including A$6.59 and a U.S. dollar component of $1.86 plus a fully franked special dividend of 39 Australian cents that Origin said its board intends to pay.

At A$9.53 per share, the new offer is above the $A8.45 to A$9.48 per share valuation range contained in an independent expert’s report examining the previous offer.

However, the report also outlined a “roll forward” calculation that said Origin’s shares could be worth an additional 40 Australian cents by the time a potential takeover is due to occur. A recent report from Macquarie said the consortium bid should be closer to A$10 per share.

“We were a no at the previous price and now we’re reviewing it,” said Jamie Hannah, deputy head of investments and capital markets at VanEck, which owns a 0.3% stake. “There’s still some debate in the market and a lot of the brokers were calling it at over A$10 and at some point you need to consider what other people are saying.”

Brookfield Asia Pacific CEO Stewart Upson said the consortium planned to invest $A20 billion to A$30 billion in Origin in the next decade to fund the company’s energy transition to achieve net zero emissions.

“With its current funding sources and as a public company, Origin will not to be able to match the level of investment at the scale and speed as it could achieve under Brookfield’s ownership,” he said.

Should the deal close, Brookfield and its partners GIC and Temasek will own Origin’s Energy Markets business, which includes power generation and retailing. MidOcean, in which Saudi Arabia’s Aramco (TADAWUL:) recently bought a stake, would take over the integrated gas business, including the 27.5% stake in the Australia Pacific LNG project.

($1 = 1.5640 Australian dollars)