Cranky Origin shareholders grill chairman on bid price

Another called for the board to seek an “out” to the deal agreed in March, while others were more concerned with the expertise and assets of an Australian company being lost to foreign ownership.

“Retail shareholders expressed a view to keep the company in Australian hands,” said Australian Shareholders’ Association representative Lewis Gomes, adding that much of the opposition to the deal voiced at the AGM was due to concerns it would pass into the hands of overseas investors.

Mr Perkins reminded shareholders of the strong premium to the traded price when the offer was agreed – about 50 per cent compared to the share price before the takeover approach was revealed last November – and said that the improved outlook had been taken into account and would also be considered by the independent expert. He cautioned that Origin’s share price may fall if the deal falls through.

‘Below value’

However, Origin shares, which first surged above the offer price last week after the merger secured approval from the competition regulator, have sustained their level, despite a 1.1 per cent dip on Wednesday to $9.20. The Origin offer was valued at $8.91 a share in March, but moves with exchange rates as it is partly denominated in US dollars.

Several institutional investors in Origin, starting with its biggest shareholder AustralianSuper, have either directly or indirectly signalled they are no longer satisfied with the value on offer from Brookfield and EIG, who plan to split the company’s assets between them.

AusSuper last month increased its holding in Origin to 13.68 per cent, saying the share price was “substantially below” its long-term value estimate, while Perpetual and Kingfisher Capital Partners have said the offer is too low given the improvement in the market outlook and other factors, including the rapid growth in partly owned UK affiliate Octopus Energy.

Macquarie Equities has calculated that the price needs to be lifted towards $10 a share or higher, while Kingfisher portfolio manager Ross Illingworth says the offer may need to be more than $11 a share.

The building resistance to the offer, which Brookfield and EIG raised twice before it was first revealed, puts at risk the 75 per cent acceptance the mega-deal needs from shareholders to proceed.

‘Responsible owners’

On the issue of foreign ownership, Mr Perkins noted the transaction is still being scrutinised by the Foreign Investment Review Board, saying the bidders had “excellent credentials” and would be “responsible owners” of Origin’s assets.

The Australian Competition and Consumer Commission last week gave a tick for the takeover, citing the public benefit that would arise from a faster transition to low-carbon energy. Brookfield has pledged to invest between $20 billion and $30 billion in clean energy through Origin over the next 10 years.

Mr Perkins told shareholders that the energy transition challenge facing Australia to meet the government’s 82 per cent renewables target for 2030 is “truly enormous”.

“What has become increasingly clear this year, with several major renewable and transmission projects delayed, is Australia is not moving fast enough,” he said, cautioning of the cost of the transition for customers.

Speaking to reporters after the meeting, Mr Calabria said the board’s recommendation is subject to the independent expert’s report and no higher offer emerging.

“Then it will be before shareholders, and really it will be up to how both the bidders and shareholders want to engage with that,” he said. “Clearly the board’s got to stay ... active in that, but it really has got its obligations under the scheme implementation deed and ... it will be very serious about those.”

Mr Calabria said he expected negotiations between Origin and the NSW government on the extension of the company’s huge Eraring coal-fired power station to be wrapped up while the generator was still under Origin’s ownership, but gave no material update on the discussions or what a deal may look like. The NSW government decided in September that the life of the country’s largest generator should be extended past Origin’s targeted closure date of August 2025.

“We’re interested to have the negotiations concluded as soon as possible,” he said, pointing to the certainty required for employees and for capital investment purposes.

He said the extension would only be for as long as it is needed to ensure there was replacement renewable and firming capacity in place for the 2880-megawatt generator to be closed.