Origin Energy share price may fall if takeover does not proceed: chair

Australia's largest electricity and gas retailer held its annual general meeting today.

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The Origin Energy Ltd (ASX: ORG) share price is down 0.81% to $9.23 per share on Wednesday.

This is 3.6% higher than the implied takeover price of $8.91 that the company agreed to in March. And this was a topic of conversation at today's annual general meeting.

Here's what chair Scott Perkins had to say.

Chair assures shareholders the deal is fair

Perkins told investors that the board had taken into account the business's improved outlook when it agreed to the revised takeover bid from Brookfield and MidOcean in March.

In his AGM speech, Perkins said:

At the time of signing the Scheme Implementation Deed, the Board had visibility of various factors shaping the outlook for the business and this was taken into account when deciding whether to enter into this agreement on the terms on which it did.

The Board was also cognisant of the fact that the Independent Expert would take into account the current performance and prospects for Origin in forming its opinion as to whether the Scheme is in the best interests of Origin's shareholders.

Ultimately, the Scheme requires shareholder approval to proceed, and the Board will continue to work to facilitate that.

On the day Origin announced it had signed the binding scheme of implementation, the Origin Energy share price closed at $8.17.

Perkins said the implied takeover price of $8.91 was subject to currency fluctuations. He said shareholders would be given an updated implied price ahead of the scheme meeting.

He said:

At the time, [the price] represented an implied consideration of $8.912 per Origin share, consisting
of Australian dollar consideration of $5.78 per share and US dollar consideration of US$2.19 per share.

The split of Australian dollars and US dollars has changed since that time, and the exchange rate has also moved.

Takeover deal now priced in

Perkins also said the takeover was now factored into the Origin Energy share price.

Origin Energy shares have risen 22% in the year to date.

He said the share price may fall if the deal did not go ahead, saying:

Shareholders should note that the trading price of Origin shares is impacted by the proposed
Scheme and that the share price may not necessarily trade at these levels in the absence of
the proposed scheme. If the scheme does not proceed, the share price may fall.

The parties are currently going through the usual regulatory processes.

The Australian Competition and Consumer Commission (ACCC) formally approved the deal last week.

A hearing is scheduled at the Supreme Court of NSW this afternoon. Origin will seek approval to convene a scheme meeting and issue the scheme booklet to investors.

If the court approves, the company anticipates lodging the booklet and notice with the ASX within 24 hours.

In this case, Origin shareholders should receive their booklets by early next week. The booklet will contain the independent expert's report and a proposed timeline for the sale.

What is the Origin Energy share price worth?

Top broker Macquarie recently suggested that fair market value is now between $9.49 and $10.08 per share.

Australia's largest superannuation fund, AustralianSuper, is Origin's biggest shareholder and recently upped its stake from 12.66% to 13.68%. A spokesman said the fund bought more Origin Energy shares because the price "is substantially below our estimate of its long-term value".

Records of AustralianSuper's ongoing purchasing activity show that during September, the fund bought millions of Origin shares at prices no higher than $8.69 per share.

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended Brookfield Renewable Partners. 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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