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Origin spurns BG’s A$13.6bn takeover bid

Origin spurns BG’s A$13.6bn takeover bid

By Russell Hotten, Industry Editor

Last Updated: 10:52pm BST 30/05/2008



Australian gas company Origin Energy has walked out of takeover talks with Britain’s BG Group, saying it believes its assets are worth more than first thought. 

BG said yesterday it was “surprised” by Origin’s decision to reject its improved A$13.6bn (£6.3bn) offer, as the two were “putting the final touches” to a deal. 

The UK company said it was “considering its next move”, and there is growing speculation that others are talking to Origin, including Royal Dutch Shell. 

BG declined to discuss raising its offer, but said in a statement: “Until Thursday, negotiating teams from the two companies were actively engaged in putting the final touches to the agreement governing the transaction. BG Group was therefore surprised to learn, earlier today, that Origin had broken off discussions.”

Origin said BG’s offer undervalued the company, adding that its coal-seam gas reserves were worth A$16bn alone. Origin cited a deal this week between Malaysia’s Petroliam Nasional and Santos, which reflected the booming price of gas assets.

“BG investors may now be concerned that the company becomes tempted to further increase its offer,” said David Thomas, an analyst at Citigroup Global Markets. “BG shares fell 6pc when the Origin Energy offer was announced [on April 30] and the shares have since underperformed the European oil sector by 5pc.”

The company wanted Origin to supply liquefied natural gas (LNG) to buyers in northern Asia, where prices have reached almost double the US benchmark.

Origin said that it had approaches from other “very credible” companies. “The company remains open to any proposal including from BG,” Origin managing director Grant King said yesterday. Origin would be “very happy” to consider an LNG joint venture with BG at the right price..

BG plans its own A$8bn LNG plant near the central Queensland port town of Gladstone, seeking to convert the fuel trapped in the state’s abundant coal reserves into LNG..

BG’s improved offer was a 48pc premium to Origin’s closing price of A$10.47 on April 29, the day before the original proposal was unveiled. Jason Kenney, analyst at ING, said: “Some people will be relieved because it won’t put pressure on BG’s gearing… but others will be disappointed if BG saw this as important to building critical mass,” he said. BG shares closed down 28p at £12.66.

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