On the Table No Longer: Origin Broke Off Discussions with BG Group
On April 30, 2008, BG Group advised the London Stock Exchange that it had approached the Board of Origin Energy Limited with an all-cash proposal to acquire all of Origin's issued ordinary shares at A$14.70 per share.
On May 28, 2008, Origin confirmed in writing that its Board had concluded that BG Group's revised cash offer of A$15.50 per share, to be implemented through a scheme of arrangement, should be put to Origin shareholders. Until yesterday, negotiating teams from the two companies were actively engaged in putting the final touches to the agreement governing the transaction, the Scheme Implementation Deed. BG Group was therefore surprised to learn, earlier today, that Origin had broken off discussions.
BG Group confirms that, prior to May 28, 2008, it had received from Origin a draft copy of their recently commissioned report into reserves, resources and prospects in coal seam gas. Following a careful review, BG Group concluded that the draft report's assumptions and conclusions were unrealistic. BG Group wrote to Origin advising that the draft report did not change BG Group's views on value. In response to the letter from BG Group, Origin confirmed the Origin Board's decision to proceed with the BG Group proposal at A$15.50 per share, subject to finalization of the Scheme Implementation Deed.
Origin disclosed to BG Group on May 29, 2008 that a significant number of their coal seam gas tenements in Queensland are subject to rights of third parties to a retransfer of up to 45% of Origin's interest in those tenements. These reversionary rights have since been referred to by Origin in its announcement May 30, 2008.
BG Group further notes that its proposition to Origin is based upon an integrated energy strategy, valuing the growth potential of all segments of Origin's business. There is an abundance of new gas supply in Eastern Australia. BG Group's value case involves the production and export of gas reserves to global LNG markets - a business in which BG Group is well established - as well as a commitment to develop the domestic market.
Global LNG markets are in transition. To add value in this market requires skills in LNG, established relationships, a low-cost structure, and speed to market, particularly in the context of Eastern Australia. BG Group's proposed premium to Origin's shareholders values this LNG opportunity together with those accruing in the downstream business segments at some A$ 4.4 billion.
BG Group's proposal of A$15.50 per share represents a premium of 48% above the Origin share price at close of trading on 29 April 2008. It offers a premium of 59% above the undisturbed 30-day volume-weighted average share price (VWAP) to 29 April 2008 and a premium of 71% above the undisturbed 90-day VWAP to 29 April 2008.
BG Group's proposal delivers full and certain value today to Origin's shareholders and removes the considerable technical, project and commercial risk which Origin would face in pursuing an LNG scheme.
In the light of these developments, BG Group is now considering its options.
- Shell Mulls LNG-Hub Network as Use by Ships and Trucks Expands (Jul 11)
- Tanzania Laws Would Allow Govt to Tear Up Mining, Energy Deals (Jun 29)
- Despite Cuts, Big Oil to Expand Production into the 2020s (Sep 05)
Company: Origin Energy more info
- Beach Energy Buys Origin's Lattice in $1.25 Billion Deal (Sep 28)
- Energy Titans Get Schooled in Sharing as Billions Seen Blown (May 09)
- Australia's Origin Energy Doubles Stake In Beetaloo Shale Gas Field (May 05)