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Origin Energy takeover grows more complex as shareholder meeting postponed

The Origin Energy (ASX:ORG) board decided to postpone Thursday’s shareholder meeting, originally scheduled to vote on the $20 billion offer from Canada’s Brookfield and EIG of the US. In a statement to the ASX at midday on Thursday, Origin revealed that the $9.43 (originally $9.53) per share offer from the partners would likely have been defeated if the meeting had proceeded as planned. The statement also mentioned that, based on proxy votes received, the required 75% shareholder approval would not have been achieved.

This development led to a series of late-night meetings and negotiations between the two companies and their advisers, resulting in a complex new bid – the third offer from the North American duo. This new bid included an alternative transaction that the board deemed “inferior” with a suggested price around $9.08 per share, albeit highly conditional.

Trading on Origin’s shares was initially paused and later halted by the ASX on Thursday at Origin’s request to consider the new development. After hours of silence and market speculation, Origin rescheduled the meeting for Monday, December 4, and provided details of the new offer without making a specific recommendation. The board stated that it would study the new proposal.

In case the December 4 vote fails, Brookfield proposes an alternative transaction where it would pay $12.3 billion for Origin’s energy business, while EIG would acquire 50.1% of its other assets, including Origin’s stake in APLNG in Queensland. Brookfield and EIG had previously stated that their $9.43 per share bid was their “best and final” offer for at least six months.

The delay in the vote provides Brookfield and EIG with more time to make their case to major shareholders. The revised proposal includes the opportunity for institutional shareholders to reinvest in the Brookfield-owned Energy Markets business after the scheme’s completion, with all other terms remaining the same. If the scheme is not approved, an alternative transaction option of $9.08 per Origin share is proposed.

Analysts suggest that this structure might be appealing to Australian Super. If the consortium’s alternative transaction succeeds, shareholders could receive a total cash consideration of up to $9.08 per Origin share, consisting of $5.25 per share from the energy markets sale proceeds and $3.83 per share from the takeover.

However, the board has reservations about the complexity, conditionality, differing value, and potential adverse tax outcomes of the alternative transaction, despite acknowledging its responsibility to assess it fully. The market has shown skepticism, with Origin’s shares closing at $8.42 on Wednesday, $1.01 below the offer price, but edging up to $8.53 after trading resumed on Thursday afternoon.

For the Scheme of Arrangement takeover offer to succeed, Australian takeover rules require 75% of votes cast at the meeting to be in favor of the offer. Typically, about 60% of shareholders vote or appoint proxies at scheme meetings, and AustralianSuper’s 16.5% stake could have a significant impact on the outcome, with potential support from smaller institutional holders.

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