Origin share price tumbles despite improved takeover offer

This energy giant's suitors have been forced to increase their takeover offer. But will it be enough?

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The Origin Energy Ltd (ASX: ORG) share price is falling on Thursday morning.

At the time of writing, the energy giant's shares are down 2% to $8.89

Why is the Origin share price falling?

The Origin share price is falling today despite news that the Brookfield-led consortium of investors and EIG have increased their takeover offer for the company.

This appears to have been done in response to Origin's largest shareholder, AustralianSuper, saying that it would not back the takeover. On Tuesday, the super fund said:

The current offer from the Brookfield and EIG-backed consortium remains substantially below our estimate of Origin's long-term value.

New takeover offer

According to today's release, the Brookfield and EIG-backed consortium have increased the cash consideration offered to all shareholders by a total of 69 cents per share, or approximately $1.2 billion.

If the scheme is implemented, the revised total cash payment to shareholders at current foreign exchange rates will be approximately $9.531 per share.

Importantly, the revised total cash payment is above the top end of the independent expert's valuation range of $8.45 to $9.48 per share and is 8% above the original offer of $8.81 per share.

The consortium has confirmed that the increased consideration is its best and final proposal, subject to no competing proposal emerging. The scheme meeting is still being held on 23 November, as previously planned.

Board recommendation

The Origin board unanimously recommends that shareholders vote in favour of the offer, in the absence of a superior proposal and subject to the independent expert continuing to conclude that the scheme is in the best interests of shareholders.

Subject to the same qualification, each member of the Origin board intends to vote, or cause to be voted, any Origin shares held or controlled by them, in favour of the scheme.

Origin's Chairman Scott Perkins said:

We are pleased to have agreed with the Consortium a significant increase in the cash consideration, reflecting the value of Origin's assets, people, and the company's strategic positioning for the energy transition. The revised consideration is now above the top end of the Independent Expert's 30 June 2023 valuation range, allowing all shareholders to receive a certain cash value for their Origin shares. We encourage all shareholders to vote in favour of the Scheme.

AustralianSuper has yet to reveal whether it would be willing to support this improved offer.

However, judging by the Origin share price performance today, the market may believe that this increase won't be enough for the super fund. If this is the case, it could mean the takeover is on borrowed time.

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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