Time's a-wasting on Origin deal

Company News

by Glenn Dyer

Will the $18.4 billion bid for Origin (ASX:ORG) happen?

Origin Tuesday gave the bidders – Brookfield of Canada and US group EIG Partners – a third extension to their exclusive due diligence, but dropped any guidance on when the bid will be signed.

The third extension is for a week only.

Tuesday’s statement did not explain why the bidders needed the extra time to finalise number crunching on their $18.4 billion offer.

Analysts think that with changes to energy market rules since the bid was announced, there’s a growing chance the deal will not happen at the original price of $9 a share.

Origin shares dipped 2% to $7.49 on Tuesday, a hint the market thinks the deal may not happen or be changed.

Origin’s short statement to the ASX made no reference to when Brookfield and EIG are expected to finalise their due diligence.

Origin had previously given the bidders an extension on their exclusive period in the data room to conduct due diligence before signing a binding deal. On Tuesday morning, Origin said it had agreed to extend it again by another week.

“The consortium has advised that it is working to complete its due diligence and has requested additional time to do so,” the company said.

Under the proposal, EIG is seeking to buy Origin’s 27.5% interest in the Australia Pacific LNG liquefied natural gas venture in Queensland.

Brookfield wants Origin’s domestic energy generation and retail division, and has outlined ambitious plans to invest another $20 billion to accelerate its roll-out of renewables with the plan to transform the company into the country’s largest clean energy owner by the end of the decade.

Market analysts in December raised doubts about the fate of the takeover after the federal government unveiled a package of short-term measures to try and bring stability to 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 what was called, “reasonable” gas-supply contract prices beyond this year, will affect domestic sales from Origin’s APLNG and have given rise to suggestions it could trigger a revaluation of the company.

However, in a statement on December 22, Origin said it had been notified by the bidding consortium that it had had “not identified any adverse material matters to date”.

But some investors wonder why the due diligence is taking so much time.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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