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Could Origin trump AGL?

Monday morning’s announcement by AGL Energy (ASX: AGK) that it has entered into agreements to purchase 19.9% of the outstanding shares of energy retailer Australian Power and Gas (ASX: APK) and that it is launching an off-market takeover priced at 52 cents per share for the remaining shares is likely to be warmly greeted by shareholders.

The offer price represents a premium of 33% to Friday’s close of 39 cents and values Australian Power and Gas at $158 million including debt. For AGL shareholders it means the purchase of 354,000 electricity and gas customer accounts and a 10% boost to AGL’s NSW customer base.

It looks to be an appealing bolt-on acquisition for AGL shareholders and one that no doubt Origin Energy’s (ASX: ORG) management will be reviewing. While it is purely speculation, Origin’s management will surely be considering whether there is any value in making a counter bid for Australian Power and Gas or whether it can’t see any shareholder value being attained by doing so.

Foolish takeaway

It hasn’t been a great 12 months for shareholders in energy retailers. While the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) has surged nearly 22%, the share price performance of AGL is flat, Australian Power and Gas is up 3% and Origin 5%. Bolt-on acquisitions such as this one may offer a sound way for the majors to boost incremental returns to shareholders.

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Motley Fool contributor Tim McArthur owns shares in Origin and Australian Power and Gas.

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