BG makes hostile Origin bid
Gas producer BG Group went hostile on Tuesday, putting a A$13.8 billion (6.7 billion pounds) bid for Australia's Origin Energy direct to Origin shareholders, as it seeks to boost its position in Asia-Pacific's fast-growing gas market. BG's all-cash bid, which values Origin at A$15.50 a share, was rejected by Origin's board last month, with Origin valuing its coal seam gas reserves alone at over $15 billion after it doubled its resource estimate to 10,000 petajoules.
Global Radio increases bid for GCapBG said the offer, which represents a 48 percent premium to Origin's closing price of A$10.47 on April 29 before the bid was announced, reflects the value of Origin's integrated energy business and the long-term prospects of its coal seam gas reserves.
"It's no surprise BG would launch a hostile bid. It's a chance for them to put out their case as well as an explanation why they think Origin's rejection was essentially flawed," said Ken West, analyst at Perennial Growth Management.
Buying Origin would also help BG fill a hole in its liquefied natural gas (LNG) business.
Shares in Origin, which have surged 84 percent this year, rose almost 6 percent to a record A$16.45. The stock was up 5.7 percent at A$16.39 by 2:20 a.m. British time, indicating investors expected a higher offer.
Origin was not immediately available for comment.
BG said it believed Origin shareholders have limited visibility of the risks inherent in Origin's reserves position and LNG joint venture alternatives.
It said Origin does not have sufficient coal seam gas reserves to support an LNG venture as there are third-party contractual rights over a large number of Origin's tenements.
Origin's domestic market requirements from coal seam gas also exceed the firm's currently available proven reserves.
"Furthermore, there are currently no operating coal seam gas LNG plants anywhere in the world; competing projects in Australia are more advanced and many billions of dollars of capital investment would be required," BG Group Chief Executive Frank Chapman said in a statement.
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