Brookfield, EIG dismiss doubts over Origin Energy takeover

Origin has agreed to extend the consortium’s exclusivity period to January 16, to enable it to finalise its due diligence over the holiday period with a view to signing “binding transaction documents as soon as possible thereafter”.

Origin’s shares started this week trading at around a 21 per cent discount to the consortium’s non-binding indicative offer price of $9 a share. They were up over 6 per cent to $7.54 on Wednesday.

Royal Bank of Canada analyst Gordon Ramsay on Wednesday said he believed the market was overstating the risk of the deal falling over.

“Even if due diligence reveals some surprises, we do not expect Brookfield and EIG to completely drop the offer for Origin, particularly since LNG exports from APLNG are not affected by the new east coast gas market legislation,” he said.

Macquarie analyst Ian Myles said Wednesday’s announcement should improve confidence that the takeover bid will proceed, while concerns an agreement may not proceed because of the government’s gas price intervention “appears misplaced, in our view”.

“The risk of delay in the transaction due to government intervention may also be misplaced, though there are still Foreign Investment Review Board and Australian Competition and Consumer Commission hurdles,” he said.

Myles added that an agreement between state and federal government to set a temporary $125-a-tonne cap on the price of domestic coal would also benefit Origin when it recontracts coal supplies for its Eraring power station in NSW in 2024.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.