BG Hostile Takeover Offer for Origin Energy (ORG)

Submitted by Craig Strzelecki on 25 June, 2008 - 09:07

The British Gas giant, BG Group, is back with its offer bid price of $15.50 a share for a hostile takeover of Origin Energy (ORG). Its offer had been earlier rejected its offer stating that the sale price has to be "a lot more" that $15.50 a share price. This time the BG has offered the price directly to its shareholders. It had earlier offered a price of $14.70 a-share price but had revised it by 48 percent to $15.50. However, Origin's board had rejected the offer at the eleventh hour when Malaysian natural gas giant, Petronas, offered $2.6 billion for 40 percent stake of Queensland LPG project from Santos. The $16 billion offer from Petronas offer for Santos was much higher that BG's erstwhile offer.

Now BG has come back with a fresh attack to Origin's rejection stating that there is no need for BG group to revise its hostile $13.8 billion bid for Origin energy. BG Chief Executive addressed the press today stating that the current bid price was "full and fair value…" for the complete takeover of Origin's business including power generation and retail. However, he was careful to leave out the term "final" for its offer.

BG asserted its fresh attack with the existing price to the shareholders stating that the company cannot compare its offer with Santos-Petronas deal as it covered the complete value including sourcing and retail. The current comparison would be better off with Shell and Arrow Energy which valued Origin's reserves at two-third lower than the estimated price. It also laid doubts in the minds of shareholders stating that Origin had not conducted enough drilling tests to justify doubling of its oil reserves. It also asserted that Origin's plans to seek a joint venture were far riskier than BG's offer of cash to its shareholders.

This new offer comes 4 weeks after the last rejection. BG Group has been rejected by Origin on two earlier occasions in April and May when it had made its offer for $14.70 a-share and $15.50 a-share. Origin issued a statement to its shareholders requesting them to not to take any action in relation to any document they receive from BG at this point of time.

The share trading on Australian exchange reflected that the chances of shareholders to accept BG's offer looked very slim as Origin's share prices traded 85 cents or 5.48 percent higher at $16.37 at 2.05pm AEST. It looks like BG Group may have to come with a better price of at least $17 per share or equivalent of $14.9 billion to lure its shareholders and win the takeover offer which has a life span of two months.