Origin Energy shares hit record high after rejection of BG Group takeover

MELBOURNE: Australia's Origin Energy Ltd. rejected a takeover offer from British gas company BG Group on Friday, citing the increased value of its coal seam gas reserves.

Origin shares soared to a record high after the nation's second-largest power retailer rejected an improved a 13.6 billion Australian dollars (US$13 billion; euro8.4 billion) takeover offer.

Origin said its rejection was based on a 121 per cent increase in its coal seam methane reserves and Thursday's US$2.5 billion (euro1.6 billion) deal between Santos Ltd. and Malaysia's Petronas to build a liquefied natural gas plant in Queensland, using coal seam gas as feed.

"Based on these recent developments, the Board has decided that the revised proposal does not adequately reflect the greater value that will be available to shareholders by not accepting this proposal," Origin Chairman Kevin McCann said in a statement.

Origin shares hit a high of A$16.15 Australian dollars (US$15.40; euro9.90) after the rejection before easing back at midday to A$15.87 (US$15.16; euro9.75), an 8.7 per cent rise.

Origin had requested a halt in trading on Wednesday ahead of an announcement about the takeover offer.
But BG Group said that up until Thursday, the two companies were engaged in putting the "final touches to the agreement" and the company was "surprised" that Origin had broken off those discussions.

The UK-based company said it had received a draft copy of Origin's report into its reserves, resources and prospects in the coal seam gas market and concluded that its assumptions and conclusions were "unrealistic."

"In light of these developments, BG Group is now considering its options," the company said in a statement.
BG Group's initial unsolicited offer was for A$14.70 (US$14.12; euro8.96) per share. After negotiations, BP Group increased its offer to A$15.50 (US$14.8; euro9.52) per share.

MF Global senior trader Anthony Anderson said the BG bid "has put a floor on the Origin price."

"The market might be factoring in maybe another competitor or an improved bid, or the market is re-rating Origin's shares on the resource upgrade, which looks pretty attractive."

BG Group was targeting electricity retailer and oil and gas producer Origin to secure its vast gas resources in eastern Australia for a proposed liquefied natural gas plant in Queensland, which will provide gas to lucrative Asian markets.