Australia's Origin Energy rejects A$13.6 billion offer from UK's BG Group

31 May 2008

UK natural gas producer BG Group Plc said it is considering its options after Australian integrated energy company Origin Energy Ltd turned down its improved A$15.50 a share takeover bid, valuing the Australian energy retailer at A$13.6 billion.

Origin said Friday BG's revised bid, which was 5.4 per cent higher than the original offer of A$14.70 a share, failed to fully reflect the value of its business, particularly its coal seam gas (CSG) reserves.

The revised proposal represents a 48-per cent premium to Origin's closing price of A$ 10.47 on 29 April, the day before BG's original proposal was unveiled, but since then the price has increased considerably. It now stands at A$15.60, higher than the offer price, after surging 6.9 per cent on the news of the offer being rejected in anticipation of higher bids.

However, BG slid 28 pence, or 2.2 per cent, to a one-month low of 1,266 pence, the lowest since 2 May.

Origin said the 121 per cent increase in its CSG reserves and a A$2.51 billion investment unveiled Thursday by Malaysia's Petroliam Nasional Bhd, better known as Petronas, in Santos Ltd.'s A$7.7 billion liquefied natural gas project in Gladstone, had encouraged it to reject BG's offer.

Origin CEO Grant King said that the price paid by Petronas for a stake in Santos' coal seam gas reserves indicates that Origin's proven, probable and possible, or 3P, gas reserves would be worth about A$16 billion.