Origin share price on watch amid $18.4b takeover offer

Origin could be about to be taken over…

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Key points

  • Origin shares could have a very strong day on Thursday
  • This morning the company confirmed the receipt of a $9.00 cash per share takeover offer
  • This is a ~55% premium to its last close price and values Origin at $18.4 billion

The Origin Energy Ltd (ASX: ORG) share price will be one to watch on Thursday.

That's because the energy company has just made a major announcement.

Why is the Origin share price on watch?

The Origin share price is likely to jump on Thursday after the company revealed that it has received a takeover approach.

According to the release, the company has received an indicative, conditional, and non-binding proposal from Brookfield Asset Management and MidOcean Energy to acquire Origin by way of a scheme of arrangement at a price of $9.00 cash per share. This will be reduced by any dividends declared and paid in the future.

This represents a massive 54.9% premium to the Origin share price at the close of play on Wednesday and values the company at $18.4 billion on an enterprise value basis. It could also be increased by 3 cents per share if completed by 15 May 2023.

Brookfield Asset Management is a Canadian investment company and MidOcean Energy is an LNG company formed and managed by EIG. Under the terms of the proposal, Brookfield would acquire Origin's Energy Markets business and MidOcean would acquire the Integrated Gas business.

Not the first offer

The release reveals that this isn't the first time that the consortium has tabled an offer. Previous offers of $7.95 cash per share in August and $8.70 to $8.90 per share in September were rejected.

On this occasion, due diligence has been granted and the Origin board has stated that if the consortium were to make a binding offer at $9.00 cash per share, then its current intention is to unanimously recommend that shareholders vote in favour of the proposal. This would be in the absence of a superior proposal.

It would also be subject to the parties entering into a binding scheme implementation agreement on terms acceptable to Origin and an independent expert concluding that it is fair and reasonable and in the best interests of shareholders.

Origin's chairman, Scott Perkins, commented:

This proposal confirms that Origin, its operations and management team represent a highly strategic platform, well-placed to benefit from the energy transition. Our confidence in Origin's prospects underscored our engagement with the Consortium and delivered a material increase on their initial offer. While the due diligence process advances, we will remain focussed on the successful execution of our strategy.

Origin CEO, Frank Calabria, added:

Over the past year, Origin has executed a number of important strategic initiatives that have strengthened the balance sheet, sharpened our strategic focus and positioned the company to prosper from the energy transition. At the same time, we have a dedicated, engaged and highly-skilled workforce who are committed to delivering good outcomes for our customers and communities. We believe Origin is in a strong position to lead the energy transition, capture opportunities and create value for shareholders.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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