BG concedes defeat over deal with Australia’s Origin
BG group said yesterday it would not increase its hostile takeover bid for Australian Origin Energy after the company agreed to a joint venture with American oil giant ConocoPhillips.
BG’s offer of A$15.50 (£7.08) a share, which expires on 26 September, will not be extended and is expected to lapse, BG said in a statement.
“The price implied by this newly announced joint venture is higher than BG Group is able to justify,” chief executive Frank Chapman said.
Investors had believed the bid was already a stretch for BG and were reluctant to see the offer raised any higher.
Conoco offered $8bn in a 50-50 venture to develop Origin’s coal-seam gas (CSG) reserves through a liquefied natural gas (LNG) project.
The failed deal is a setback for BG’s strategy to expand production of LNG in its Asia-Pacific arm to feed growing demand in Asia.
Adrian Jackson, fund manager at Investec Asset Management, said it would make strategic sense for BG to seek other acquisitions in the region, especially in Australia, or to grow by buying licences and exploring.
Australian energy Santos has been mooted as a potential target once the government lifts its 15 per cent shareholding limit in November.
Mark Greenwood, analyst at JP Morgan in Sydney, said: “I think BG will continue to look for opportunities in Australia and there is a chance that BG could look to secure control over Queensland Gas.”
Analyst Views: Was BG correct to not increase its offer?
Jason Kenny (ING): “Yes, BG still has the deal with Queensland Gas that they made earlier in the year. That’s material enough to support their ambitions in the foreseeable future. They would like to acquire the bulk of Origin but not at any price.”
Ivor Pether (Royal London Asset Management): “In terms of today’s announcement, I don’t think anybody is surprised by it. They ended up sticking with their valuation principles. Clearly they were early in spotting the value proving the initial scepticism from major oil companies was unjustified.”
Howard Wheeldon (BGC Partners): “I think they are responding to events and pressures that they do not overpay. It is regrettable as BG needs to do exactly this type of acquisition but it can not ignore shareholder pressures or external pressures at the moment.”