BG makes hostile bid for Origin
BG Group put its A$13.8 billion ($13.1 billion) bid for Australia’s Origin Energy direct to shareholders, saying management was wrong to reject the offer and may have overvalued its coal-seam gas reserves.
By Bloomberg |
PERT/AUSTRALIA: BG Group put its A$13.8 billion ($13.1 billion) bid for Australia���s Origin Energy direct to shareholders, saying management was wrong to reject the offer and may have overvalued its coal-seam gas reserves.
The hostile all-cash offer values shares of Australia���s biggest producer of gas from coal seams at A$15.50 each, 48% more than they were trading at before BG, the UK���s third-largest oil and gas producer, first bid April 30.
Origin���s shares jumped above the offer price to a record as investors bet the bid may be increased to win shareholder support. BG wants the Sydney-based company���s gas resources in eastern Australia, which may feed a proposed liquefied natural gas project supplying utilities in northern Asia.
���BG is giving itself room to move,��� said Gavin Wendt, resources analyst at Fat Prophets Funds Management in Sydney. ���This may not be the last offer on the table.��� Origin���s suggestion that its coal-seam gas reserves were worth A$16 billion overstated their value, BG chief executive officer Frank Chapman said in conference call. The Australian company board rejected a bid of A$15.50 on May 30, citing the increased value of its reserves.
���We are confident that this offer represents a compelling case to shareholders,��� Chapman said. ���BG is not here to steal something, we think the bid is very credible and we���re not ashamed of it. It���s not our intention to raise our price, but we reserve the right to do so.���
Origin rose as much as 93 cents, or 6%, to a record A$16.45 and closed at A$16.42 in Sydney. BG dropped 10 pence, or 0.8%, to 1,250 pence in morning trade in London. ���The fact that BG has not increased the headline offer price is a positive move,��� David Thomas, a London-based analyst at Citigroup Global Markets Inc, said in an e-mailed note. ���A significantly higher offer would not have sat well with BG���s shareholders.���
Should the acquisition go through, it would be the second-largest foreign takeover of an Australian company after the $14.2 billion purchase last year of Rinker Group by Cemex AB, North America���s largest cement producer.
It also said the decision by Petroliam Nasional Bhd., Malaysia���s national oil company, to pay $2.51 billion for a stake in a rival LNG project being developed by Santos showed its resources were worth more.
Petronas May 30 agreed to pay A$4.91 a gigajoule for proven and probable coal-seam gas reserves from Adelaide-based Santos. That���s more than the A$2.16 a gigajoule offered by BG for all of Origin���s oil and gas reserves calculated from BG���s bid price, Origin���s debt and other businesses value.
���There are a lot of analysts out there at the moment who think that the value of Origin is much higher, some in excess of A$20��� a share, Michael McCormick, who helps manage about $155 million at Leyland Private Asset Management in Sydney, said in a Bloomberg Television interview.
``It���s unusual that BG has come out with basically the same offer as before,������ said Rob Patterson, who manages the equivalent of $3.8 billion at Argo Investments Ltd. in Adelaide. ``BG wants the opportunity to tell shareholders why it believes its bid is good, while Origin will again be giving them reasons to reject it.������
BG, the largest supplier of LNG from the Atlantic Basin into Asia, in February formed a venture with smaller coal-seam gas producer Queensland Gas Co. to build an A$8 billion LNG export project in Gladstone. The venture is one of five rival projects in the northeastern Australian city based on coal seam gas, which hasn���t previously been used as a fuel for LNG. To contact the reporter on this story: Jason Scott in Pert.
Origin���s shares jumped above the offer price to a record as investors bet the bid may be increased to win shareholder support. BG wants the Sydney-based company���s gas resources in eastern Australia, which may feed a proposed liquefied natural gas project supplying utilities in northern Asia.
���BG is giving itself room to move,��� said Gavin Wendt, resources analyst at Fat Prophets Funds Management in Sydney. ���This may not be the last offer on the table.��� Origin���s suggestion that its coal-seam gas reserves were worth A$16 billion overstated their value, BG chief executive officer Frank Chapman said in conference call. The Australian company board rejected a bid of A$15.50 on May 30, citing the increased value of its reserves.
���We are confident that this offer represents a compelling case to shareholders,��� Chapman said. ���BG is not here to steal something, we think the bid is very credible and we���re not ashamed of it. It���s not our intention to raise our price, but we reserve the right to do so.���
Origin rose as much as 93 cents, or 6%, to a record A$16.45 and closed at A$16.42 in Sydney. BG dropped 10 pence, or 0.8%, to 1,250 pence in morning trade in London. ���The fact that BG has not increased the headline offer price is a positive move,��� David Thomas, a London-based analyst at Citigroup Global Markets Inc, said in an e-mailed note. ���A significantly higher offer would not have sat well with BG���s shareholders.���
Should the acquisition go through, it would be the second-largest foreign takeover of an Australian company after the $14.2 billion purchase last year of Rinker Group by Cemex AB, North America���s largest cement producer.
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Origin shareholders should take no action over Reading, England-based BG���s offer, the company said in a statement to the Australian stock exchange. Origin���s board rejected the previously agreed offer after doubling its coal-seam gas reserves.It also said the decision by Petroliam Nasional Bhd., Malaysia���s national oil company, to pay $2.51 billion for a stake in a rival LNG project being developed by Santos showed its resources were worth more.
Petronas May 30 agreed to pay A$4.91 a gigajoule for proven and probable coal-seam gas reserves from Adelaide-based Santos. That���s more than the A$2.16 a gigajoule offered by BG for all of Origin���s oil and gas reserves calculated from BG���s bid price, Origin���s debt and other businesses value.
���There are a lot of analysts out there at the moment who think that the value of Origin is much higher, some in excess of A$20��� a share, Michael McCormick, who helps manage about $155 million at Leyland Private Asset Management in Sydney, said in a Bloomberg Television interview.
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The BG bid will be funded with BG���s own cash and a syndicated loan arranged by Banco Santander, HSBC Holdings, Societe Generale and Royal Bank of Scotland Group. It���s being advised by Goldman Sachs International, Gresham Advisory Partners, Deutsche Bank AG and Morgan Stanley Australia.``It���s unusual that BG has come out with basically the same offer as before,������ said Rob Patterson, who manages the equivalent of $3.8 billion at Argo Investments Ltd. in Adelaide. ``BG wants the opportunity to tell shareholders why it believes its bid is good, while Origin will again be giving them reasons to reject it.������
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LNG demand is set to increase by 10 percent a year through 2015, more than five times the estimated gains in crude oil, as power producers switch to cleaner fuels, according to Citigroup. LNG is gas chilled to liquid form for transportation by tanker. Coal-seam gas, mostly comprising methane, bonds as a thin film on the surface of coal and is released when pressure is reduced, usually after water is removed. BG, the largest supplier of LNG from the Atlantic Basin into Asia, in February formed a venture with smaller coal-seam gas producer Queensland Gas Co. to build an A$8 billion LNG export project in Gladstone. The venture is one of five rival projects in the northeastern Australian city based on coal seam gas, which hasn���t previously been used as a fuel for LNG. To contact the reporter on this story: Jason Scott in Pert.
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