The Origin Energy Board and Contact Energy Independent Directors believe that the terms of the proposed merger appropriately reflect the relative value of both companies and that the merger would create value for both sets of shareholders.
However, it has become evident to the Origin Energy Directors that there is not sufficient support from key shareholders of Contact Energy for the merger proposal to be approved under the current terms.
Origin Energy has considered whether any change in the terms of the merger proposal could be contemplated.
Mr. Kevin McCann, Chairman of Origin Energy, said "We are always mindful of the need to ensure we are adding value for Origin Energy shareholders. We have concluded that to improve the terms of the merger proposal for Contact Energy minority shareholders would not be in the best interests of Origin Energy shareholders.
"We are disappointed that we have not gained sufficient indications of support from Contact Energy shareholders for the merger proposal. We believe the merger of the two companies would have resulted in both Origin Energy and Contact Energy shareholders participating in the significant benefits flowing from combining two strong companies."
The Origin Energy Board has reluctantly concluded that the management time, effort and cost in pursuing a merger, which market and shareholder feedback indicate is unlikely to be approved, is not justified."
The Contact Energy Independent Directors and Origin Energy have therefore agreed to terminate the Merger Implementation Agreement entered into between Origin Energy and Contact Energy on February 20, 2006.
Mr. Grant King, Origin Energy's Managing Director, said "In addition to its 51.4% shareholding in Contact Energy, Origin Energy has diverse business interests in New Zealand including operatorship of the proposed Kupe Gas Project, significant exploration opportunities in the Taranaki, Northland and Canterbury basins and ownership of Rockgas, the largest LPG distribution and retail business in New Zealand. Origin Energy will continue to pursue development of all these businesses in the best interests of its shareholders."
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