Origin buyout faces hurdle as major investor ups stake

Pension fund giant AustralianSuper has increased its stake in takeover target Origin Energy, the country’s second largest energy generator and retailer, in a move that threatens to complicate the proposed $18.7 billion buyout led by Canada’s Brookfield Asset Management.

AustralianSuper has raised its holding in Origin to 13.68%, an increase of 1.02 percentage points. The move gives the pension fund a greater say on whether the Brookfield-led consortium’s acquisition goes ahead since it requires the approval of at least 75% of the votes cast.

Origin agreed in March to the offer from Brookfield and United States-headquartered energy infrastructure investment giant EIG Partners’ MidOcean Energy but AustralianSuper this week said the company’s share price is well below its value estimate, suggesting that the bidding consortium will need to increase its takeover offer to secure the energy company.

“Origin’s current share price is substantially below our estimate of its long-term value and this is why we have increased our holding in the company,” AustralianSuper said in a statement.

“Origin has a unique portfolio of market-leading energy assets and an advantaged position to capture value from the energy transition.”

The takeover vote, which requires the approval of at least 75% of the votes cast, and more than 50% of Origin investors in number voting, is not expected before the end of the year or early next year.

The Brookfield offer is still subject to several conditions, including securing approval from the Australian Competition and Consumer Commission (ACCC), the Foreign Investment Review Board and other regulators. The ACCC is due to release its ruling on the transaction on October 12, having already twice delayed the date.

If the acquisition goes ahead, it is expected the bidding partners will split the business, with Brookfield taking Origin’s energy generation and retailing businesses while MidOcean would acquire Origin’s gas business, including its interest in Australia Pacific LNG.

Brookfield said if the proposal is successful, it would invest an additional $20 billion to $30 billion to develop up to 14 GW of new renewable generation and storage assets within the Origin Energy business by 2033.