Brookfield consortium trims Origin offer to $15.33b

Origin Energy logo on side of corporate headquarters (profit)
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A Brookfield-led consortium has reduced its offer to buy Origin Energy by 1%, valuing Australia’s second biggest power producer and energy retailer at $15.33 billion, after government moves to cap gas prices hit valuations in the sector.

Reuters reported Origin shares surged 13% to $7.90 in early trade but remained well below the new tabled offer of $8.90 per share as investors weighed the risks of a transaction going ahead.

Related article: Origin backs $18.4b buyout from Brookfield consortium

The consortium’s first offer in November of $9 per share was a near 55% premium to its previous close and valued Origin $15.5 billion.

Origin’s ninth largest investor Argo Investments said the revised offer was still good value for the takeover target.

“We are still positive on this deal,” Argo’s senior investment officer Andy Forster told Reuters.

“It’s only a small reduction in terms of value following the government intervention with the gas price caps.”

The parties did not explain the drop in price, however, Australian gas companies have seen their valuations hit by the government’s planned 12-month cap on gas and coal prices to keep a lid on bills for households and businesses hit by soaring global energy prices.

The Origin statement on Wednesday mentioned, for the first time, that the revised proposal was conditional on the “completion of black box due diligence”.

“The market is clearly factoring in the remaining risks and regulatory risks will be a big part of that,” Morgans analyst Max Vickerson said.

“It’s also worth noting that due diligence isn’t quite complete either.”

Related article: Origin announces plan to quit gas exploration

The Origin board stopped short of delivering a recommendation of support for the bid, another condition needed for the offer to proceed.

Under the plan, Brookfield Asset Management would acquire Origin’s energy markets business, while MidOcean Energy, the other consortium partner which is backed by energy investment firm EIG, would take control of Origin’s integrated gas business, including its 27.5% stake in Australia Pacific LNG (APLNG).

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