Australia’s second-largest energy retailer, Origin Energy Ltd, said yesterday it had received a A$12.9 billion (US$12.05 billion) takeover proposal from UK-based BG Group.
BG Group, a global integrated gas major, had offered A$14.70 a share, Origin announced in a statement.
“Origin has not yet considered the proposal. Discussions between the parties will take place and shareholders will be advised of the outcome,” the company said.
Origin cautioned that the discussions may not lead to an agreed transaction and advised shareholders to take no action until further announcements.
Origin shares soared after the announcement, jumping 36.6 percent to A$14.30 by 12:20pm yesterday.
The offer represented a 40.4 percent premium to Origin’s closing price of 10.47 on Tuesday.
BG, one of the world’s most active liquefied natural gas traders, is the UK’s third-largest natural gas producer. The company has been active in Australia this year, striking an agreement with coal seam gas producer Queensland Gas Company Ltd to build an A$8 billion LNG plant in the north-eastern state of Queensland.
Origin in recent years has moved to gain the number one position in the fast-growing Australian coal seam gas sector. The company currently has 4,578 petajoules of coal seam methane in proven, probable and possible reserves and potentially double this in nearby land.
Citigroup on Tuesday upgraded its recommendation on Origin to “buy” from “neutral” and put a 12-month price target of A$11.80 on the stock.
“Origin’s fuel integrated strategy has set the company in prime position against the backdrop of rising electricity and gas prices,” Citigroup said in a research report.
The group had strong near-term earnings momentum, as well as a solid growth outlook further into the future, largely owing to the considerable investment in organic growth, with capital expenditure peaking at A$1.7 billion in the year to June next year, it said.
Origin’s Queensland coal seam gas reserves provide it with the potential to participate in an LNG supply project and benefit from higher gas prices through its retail and generation businesses, it said.
“Their downside is limited, due to their electricity and gas channels to market,” the research report said.
In February, the company forecast an increase in its year net profit — to be released in June — of at least 15 percent from last year’s underlying net profit of A$370 million.