An Origin Energy Takeover from AustralianSuper is not happening, so now what? Here are 4 possibilities

Nick Sundich Nick Sundich, December 6, 2023

The Origin Energy Takeover offer from Brookfield and EIG was formally voted down earlier this week. Although a majority of Origin investors voted for it, there had to be 75% in favour and only 69% were. The promise of $20bn could have helped the company transition seamlessly to becoming a lower-carbon emitter, but shareholders rejected it. As we predicted, shares fell on the day as shareholders are left facing an uncertain future. Where to now?

We thought we’d take a look at where the company could go to from here and how these options look.


Options avaliable now that the Origin Energy takeover failed


1. Help from AustralianSuper

AustralianSuper is arguably the reason why the deal failed, given the stake it accumulated in the company to become its largest investor. The whole basis for opposing the scheme was that it was undervaluing the company, considering the opportunity it had to profit from decarbonisation. The fund has said it would be open to providing capital to Origin, and we think it should put its money where its mouth is. Because the profit potential for AustralianSuper aside, Origin Energy as such a large energy provider must be at the forefront if Australia is indeed to transition. With $300bn under management, it is not as if it doesn’t have money to invest, and we don’t imagine that the bulk of AustralianSuper’s clientele would take issue.


2. A Demerger

There is a precedent here. Origin Energy stood under Boral until it was demerged in 2000. It was a good call, with revenue growing from $1bn to $14.5bn within 20 years. Beyond this, it gave shareholders the choice as to what part of the business they wanted to be invested in.

Well, now there is potential for something similar to happen. We say ‘something similar’ because there are a few options it could take. One is splitting the energy markets business from the APLNG gas export business. This is something that Allan Gray portfolio Simon Mawhinney has publicly proposed. It could alternatively do what Fortescue did, split its core business from its emerging business.


3. Another takeover bid

We don’t envision Brookfield trying again any time soon, given how many times it increased the bid to try and get investors to agree. But maybe, just maybe, some big institutional investor might come forward with a bid that will get AustralianSuper’s blessing. Obtaining this will clearly be key. No one wants to go through a several month saga all over again, so any suitor will have to name a good price upfront.


4. A more aggressive transition plan

One of the key promises Brookfield made was that the proceeds would help it fund the decarbonisation plans. It had endorsed existing plans, such as closing the Eraring coal-fired generator in mid-2025. But inevitably, it had its own plans that it would execute once the deal was done.

Perhaps now the company could bolden its ambitions. And even if these would be more costly, they could attract another takeover offer in the future. Alternatively, the plans could be more spread out over time, making it more likely to be funded with free cash flows as opposed to dilutive equity funding or debt finance.


Forget hypotheticals, what about the immediate reality?

All these could happen, but remain hypotheticals for now. Shareholders could have had some sweet cash for their investment and not have had to worry about the transition. A little have for a ‘could have’, however. All investors will inevitably be watching the next steps at Origin, because they will be key for the entire nation’s transition to a decarbonised future.


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