Shareholders Block the Takeover Bid of Origin Energy

Dale Gillham, Chief Analyst and Head Trainer of Wealth Within

By Dale Gillham |

Last week, I was excited to see Origin Energy shareholders reject the takeover bid by Canadian asset management company Brookfield and US-based EIG and their attempts to privatise our country’s largest energy provider. I have to say I hate great Australian companies falling into the hands of overseas companies and being taken off our exchange, especially if the company is acquired for less than its real value.

Also, I have issues with larger shareholders agreeing to these takeovers to gain in the short term rather than looking at the bigger picture. The rejection by shareholders marks the end of a 13-month corporate drama, making it Australia's largest and lengthiest takeover.

Why Australian super rejected the takeover of Origin Energy

Surprisingly, the main shareholder blocking this deal was Australian Super, as it believed that Origin Energy’s value and future are better served in the hands of members and shareholders rather than a private equity consortium looking for quick returns. On behalf of all Australians, I am truly glad to see Australian Super, whose members are everyday Australians, stand up to block this 20-billion-dollar takeover bid.

Australian Super, who holds a 17 per cent stake in Origin Energy, said the offer, priced at $9.39 per share, was ‘low-ball’ despite 69 per cent of shareholders supporting the bid. For the offer to be accepted, Australian takeover rules require approval from at least 75 per cent of the shareholders, which means the offer fell short.

Brookfield and EIG's bid aimed to utilise Origin as a vehicle to lead Australia's transition from coal-powered electricity to renewable energy. However, shareholders, including Australian Super, believed the offer undervalued Origin, especially considering the company's rising profitability and increased stake in UK energy firm Octopus.

The bid's failure highlights the influence of major shareholders, often big institutions, in determining the fate of significant deals. In my humble opinion, we need more institutions to look at the bigger picture.

Given what transpired last week, we cannot underestimate Australian Super's role in opposing the bid for Origin. Superannuation companies are growing larger by the day and increasingly have more power, so I hope others are looking at the lead shown this week by Australian Super. I also hope that we continue to see more shareholder resistance, and why I strongly advocate for direct share ownership by Australians to protect our valuable resources and companies.

Currently, the share price of Origin Energy is down more than 16 per cent since the announcement, which is exciting for those who don’t hold the stock. If it was undervalued at $9.39 a share, then there is some good upside to come. I’d be keeping an eye on this stock as the price will eventually find support, and investors who are watching could grab a nice opportunity. It’s not often you get a second chance to buy part of a quality company that has shrugged off a multibillion-dollar offer.

What were the best and worst-performing sectors last week?

The best-performing sectors included Real Estate, up 3.51 per cent, followed by Consumer Staples, up 2.59 per cent and Information Technology, up 2.14 per cent. The worst-performing sectors included Energy, down 1.30 per cent, followed by Utilities, down, 76 per cent and Industrials, up 1.20 per cent.

The best-performing stocks in the ASX top 100 included Alumina, up 14.08 per cent, followed by Allkem, up 8.02 per cent and Block, up 6.98 per cent. The worst-performing stocks included Evolution Mining, down 10.89 per cent, followed by QBE Insurance, down 5.28 per cent and Origin Energy, down 4.16 per cent.

What's next for the Australian stock market?

There is a saying that all good things come to those who wait and over the past few weeks and months, I have urged everyone to be patient as the time to buy some great stocks will come. While I was positive, I was still being very cautious, given how many false triggers we have seen in the past few years. However, our patience was rewarded last week as the All Ordinaries Index rose 1.65 per cent to its highest level in eleven weeks.

In my previous report, I mentioned that for me to be more positive, the price needed to continue to rise above 7,334 points, which is what has occurred. But I am even more excited that this current move is being driven by the big end of town, with the Financials up 1.54 per cent and Materials rising 2.04 per cent.

We need to remember that the top 20 stocks in our market make up around 50 per cent of the market capitalisation, so for our market to gain momentum in a particular direction, we need to see these stocks move. Currently, many stocks in the top 20 look great, including CBA and WES. While it is a little too early for CSL, MQG and COL, these stocks are worth putting on your watch list.

For now, good luck and good trading.

Dale Gillham is the Chief Analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of the bestselling and award-winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online.

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