Origin Bid Up In Air As Bg Gets Cashed Up

Sydney Morning Herald

Saturday May 10, 2008

Jamie Freed

ORIGIN ENERGY shares surged to a record high yesterday after BG Group disclosed it had received firm commitments from banks to finance its $12.9 billion bid.

Earlier this week, the chairman of BG, Sir Robert Wilson, and the chief executive, Frank Chapman, visited Sydney to discuss the offer with their counterparts from Origin.

It is understood some senior BG executives have remained in Australia as part of continuing, but so far inconclusive, talks with Origin.

The target has yet to give a formal response to the offer, but at a presentation in Sydney on Wednesday, Origin's chief executive, Grant King, said the valuation was "not challenging" in light of his company's extensive coal-seam gas resources.

Origin shares closed 32c higher at $14.57, after trading as high as $14.61 yesterday, but remained below the $14.70 offer price.

Argo Investments' managing director, Rob Patterson, said he was surprisedthe shares were still trading below the bid price.

"There's a feeling Origin might be going to try to argue for more," he said.

"[The bid] was initially viewed as [high], but I think as people have thought further about it ... perhaps it's not enough."

In response to the corporate regulator's request for more details about its bid, the British energy company said it had been made "explicitly" on the basis that it was subject to contract, confidential and to be implemented co-operatively and quickly via a scheme of arrangement.

A scheme of arrangement deal cannot proceed without the agreement of both parties.

It is understood Origin told BG of its intentions to break the confidentiality clause after receiving legal advice.

Origin was criticised last year for its disclosure surrounding merger talks with AGL Energy.

BG's proposal is not subject to due diligence. It requires the confirmation of certain assumptions around possible third-party rights, commitments, liabilities, litigation and financial exposures. It is also subject to several regulatory approvals, including the nod from the Australian Competition and Consumer Commission and the Foreign Investment Review Board.

The fate of Origin's 52 per cent stake in New Zealand's Contact Energy could become clearer early next week when the nation's Takeovers Panel is expected to release a ruling on whether BG's bid for Origin would require the British company to make a takeover offer for Contact.

BG has so far indicated that it intends to keep Origin's downstream assets in Australia and to participate in the NSW electricity privitisation process, but it has not disclosed its plans for Contact.

BG said that the deal would require approval from its own shareholders before the planned scheme vote by Origin's shareholders.

© 2008 Sydney Morning Herald

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