The North American consortium behind an $18.4 billion takeover offer for Origin Energy says it has not identified any significant “adverse matters” that could derail its bid, despite market concerns about the impact of the federal government’s emergency east coast gas price caps.
Origin Energy, one of the largest Australian power and gas companies, last month opened its books to Canadian asset manager Brookfield and US-based energy investor EIG, which lobbed a $9-a-share offer to buy Origin and divide up its assets between them.
Representing nearly a 55 per cent premium on the stock’s previous closing price, the offer had been considered to have a high chance of success, with Origin’s board intending to recommend shareholders to back the deal.
However, analysts last week raised doubts about the fate of the blockbuster takeover deal 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 next year, will affect domestic sales from Origin’s jointly owned APLNG liquefied natural gas joint venture in Queensland.
“We think this new legislation has potential to possibly trigger a material adverse change clause in the Brookfield and EIG $9 a share bid for Origin Energy,” analysts at the Royal Bank of Canada said.
“Under a price cap scenario, Origin would get lower pricing for its APLNG domestic gas sales volumes … this is mainly because of the short-term nature of its APLNG domestic gas supply contracts.”
In a statement on Wednesday morning, Origin said it had been notified by the bidding consortium that it was on track to complete due diligence early in the new year, and had “not identified any adverse material matters to date”.
Origin has agreed to extend the consortium’s exclusivity period to January 16, to enable it to finalise its due diligence over the holiday period with a view to signing “binding transaction documents as soon as possible thereafter”.
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