SYDNEY, Oct 10 (Reuters) – Origin Energy (ORG.AX) shares soared 5.3% on Tuesday to top a Brookfield Corp-led (BN.TO) consortium’s A$15.35 billion ($9.76 billion) offer price after Australia’s competition regulator cleared the deal, which still requires shareholder approval.
The Australian Competition and Consumer Commission (ACCC) said on Tuesday the purchase of the country’s second-largest power generator was likely to speed up Australia’s renewable energy transition and could lead to a more rapid decrease in greenhouse gas emissions.
Origin said the ACCC approval was an “important milestone” in the acquisition process.
The deal requires shareholder approval by 75% of votes cast at a scheme meeting. Australian Super, the largest investor, raised its stake to 14% last month and called the shares undervalued.
“Australian Super holds a large stake and could form a voting bloc big enough to cause issues for the deal,” said Max Vickerson, an analyst at stockbroker Morgans.
Perpetual, a major Australian fund manager and Origin shareholder, has pushed Brookfield and its partner, U.S. private equity firm EIG, to consider raising their offer to win Origin, according to local media reports.
Australian Super and Perpetual representatives did not respond immediately to a request for comment.
A spokesperson for the bidding consortium said it welcomed the antitrust approval and looked forward to progressing the transaction, declining further comment.
Origin shares jumped to A$9.19 in early trading, well above the A$8.91 per share price of the consortium bid lodged in March, on speculation a higher offer could be forthcoming.
“I’m not sure how much higher the buyers are prepared to go, but they have been pretty persistent so far,” Vickerson said.
The bid is the second largest buyout underway in Australia currently behind Newmont Corp’s (NEM.N) $16.7 billion offer for Newcrest Mining (NCM.AX) which is due to be voted on by investors later this week.
Total Australian mergers and acquisition activity in Australia has fallen 25.7% in the first three quarters of 2023 compared to the same time last year, according to LSEG data.
Under the consortium deal, Origin will be broken up into two businesses, with its energy markets arm including its electricity generation and electricity and gas retail businesses to be acquired by Brookfield.
EIG’s MidOcean Energy, the other consortium partner, will take control of Origin’s integrated gas business.
The ACCC decision had been closely watched as Brookfield’s ownership of AusNet Services, a Victoria-based transmission company that has electricity and gas distribution networks, was identified by analysts as a potential concern for the regulator.
The regulator said Brookfield would have to commit to having two separate management groups for Origin and AusNet that had no involvement with each other.
Brookfield would also be prohibited from selling more than 10% of either Origin or AusNet in the future to one party.
“These commitments are intended to reduce the likelihood of Brookfield or AusNet engaging in certain conduct that would favour Origin or otherwise disfavour Origin’s rivals,” ACCC Chair Gina Cass-Gottlieb said in a statement.
Brookfield plans to house the energy markets business in its global transition fund, which it said was the largest private fund in the world focused on the transition to net zero emissions.
Reporting by Scott Murdoch; Editing by Jamie Freed
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