Gas explorer BG Group turned up the heat on Australia’s Origin yesterday by announcing plans to make an improved £6.7billion offer direct to shareholders.
The decision to go hostile comes a month after Origin’s board backed an offer from BG, but changed its mind a day later because a separate deal in the industry caused executives to rethink the company’s value. The latest proposal is 5.4% more than BG offered in its initial bid and a 48% premium on Origin’s closing price before BG announced its opening offer.
BG is eyeing Sydney-based Origin as a route to expanding its presence in the region and bolstering its assets in coal-seam gas: methane gas trapped underground in deep coal seams by water. Origin has undeveloped coal-seam assets in the Surat Basin and Bowen basins in southern Queensland containing unusually “clean” methane with very small amounts of nitrogen and carbon dioxide.
Origin Energy also has more than 2.7million power customers in Australia, New Zealand and the Pacific alongside its exploration and production activities. It has around 3,000 staff and was demerged from Boral, Australia’s biggest construction and building materials firm, in 2000. As well as finding natural gas, it also produces environmentally-friendly power from solar, wind and hydro-electric generators.
Origin changed its mind after details emerged of a deal between Malaysia’s national oil company Petronas and Australian oil and gas producer Santos.
The partnership to build a liquefied natural gas plant using coal seam gas set a new benchmark for valuing those resources, analysts said.
BG said the Santos-Petronas deal was not a relevant price benchmark for Origin’s coal seam gas reserves. It added: “BG Group believes that its offer represents a material premium for Origin shareholders which reflects the value of Origin’s integrated energy business and its longer-term prospective coal seam gas development.”