Origin Energy Ltd. has agreed to a US$10.2-billion takeover offer that would see Brookfield Asset Management Ltd.’s BAM-T renewables arm invest up to US$750-million with a consortium of investors that will break up the Australian power generator into two companies.
The deal, worth 15.3-billion Australian dollars, will be paid in cash in a mix of Australian and U.S. dollars for an implied price of 8.91 Australian dollars per share. That is a 53.4-per-cent premium to Origin Energy’s share price the day before the deal was first proposed last November, and is 9.1 per cent above the latest closing price last week.
The precise amounts each of the consortium’s members will contribute to the deal has not been disclosed.
Brookfield Renewable Partners and its consortium investors, which include Singaporean funds GIC and Temasek as well as liquefied natural gas company MidOcean, first announced a richer bid for Origin Energy last year. However, the group lowered the offer price last month after the Australian government’s move to cap gas prices hit valuations in the sector.
Origin Energy’s board has unanimously backed the deal, aiming to close it by early 2024. The transaction is subject to shareholders in Origin approving it, an independent expert deciding the offer is fair, as well as regulatory and court approvals.
Once the deal closes, Brookfield and its partners will own Origin’s energy markets business, which is Australia’s largest owner of natural gas-fired power stations, and also produces electricity from coal, wind and other sources. MidOcean Energy will own the business focused on the production and supply of natural gas.
Origin has a 24-per-cent share of Australia’s electricity market. Brookfield is making the investment through its US$15-billion global transition fund, which will be funded partly by corporate debt and from the proceeds of asset sales.
Brookfield said it intends to invest in reducing Origin’s carbon emissions with a business plan that could see at least 20-billion Australian dollars invested over the next decade in renewable power generation and storage facilities in Australia. If successful, that could allow Origin to retire one of the country’s largest coal-fired power generation plants, Eraring, Brookfield said in a news release.
Brookfield is a major player in renewable power, with about 25 gigawatts of generating capacity and a pipeline of projects to develop 110 gigawatts around the world.
The integrated gas segment MidOcean Energy is acquiring includes a stake in an Australian liquefied natural gas pipeline. MidOcean and its parent company, U.S.-based investor EIG Global Energy Partners, have framed gas and LNG as fuels that can act as a bridge in the transition from more heavily polluting energy sources and cleaner, renewable alternatives.
“As the energy transition gathers pace, what’s needed is increasingly clear: faster deployment of large-scale renewables, the accelerated, responsible retirement of coal generation, and an interim, supportive role for gas as the dependable back-up fuel,” Mark Carney, chair of Brookfield Asset Management and head of transition investing, said in a prepared statement.
Brookfield’s Asia Pacific chief executive officer, Stewart Upson, said in a statement that the transaction fits a strategy to “go where the emissions are” by “putting billions of dollars behind an executable plan to reduce emissions at Origin.”
Brookfield has the right to match any higher bid that could emerge for Origin, according to filings.
Citigroup Inc. and MUFG Bank Ltd. advised Brookfield on the deal, and UBS Group AG and JPMorgan Chase & Co. advised MidOcean.