Shares in Australia’s second biggest energy retailer, Origin Energy jumped by almost 40% yesterday after it said it had received a $13 billion takeover offer from British gas company, BG Group.
In a letter to the ASX Origin said that BG Group, an integrated natural gas company, had approached it Tuesday evening with a proposal to buy all of its shares at a cash price of $14.70 each, valuing the target at about $12.91 billion. Origin shares last traded at $10.47 Tuesday.
Not for long: the shares closed up 33%, or $3.48, at $13.95 after going as high as $14.60 on the resumption of trade as punters piled into the stock in the hope of a higher offer. More than 29.4 million shares were traded, valued at over $422 million. It was a rare trading opportunity for hedge funds.
Origin said it has not yet considered the proposal and ”Discussions between the parties will take place and shareholders will be advised of the outcomes. These discussions may or may not lead to an agreed transaction. Origin shareholders should take no action with respect to their Origin shares, pending further announcement.”
In March 2007 Origin walked away from a proposed $15 billion ‘merger of equals’ with AGL after rejecting the approach and claiming it would not add value.
The BG Group proposal is subject to shareholder and regulatory approvals.
BG recently took up a 9.9% stake in Queensland Gas Co and pumped in hundreds of millions of dollars into QGC’s coal seam methane gas project which is aimed at building an export LNG project, as well as supply gas to business and retailers in southern Queensland. AGL Energy owns around 26% of QGC.
BG also has a minority stake in oil and gas discoveries in very deep water and difficult conditions offshore Brazil which have been described as perhaps the largest discoveries in two decades.
It looked at buying the former Hardman Resources in Australia back in 2004.
BG Group is also said to be the largest importer of liquefied natural gas (LNG) into the US.
Origin shares surged $4.13 to a high of $14.60 yesterday morning after the statement was issued in a trading halt. That’s up 39%.
They later settled.
Origin provides gas and electricity to more than three million homes and businesses across Australia, New Zealand and the Pacific.
This is the second time in less than 12 months Origin has attracted corporate interest after AGL Energy Ltd, Australia’s largest power retailer, proposed a $14 billion merger of the two companies.
Shareholders in recovering retailer and wholesaler, Australian Pharmaceutical Industries will have to wait another six months or so to see if they company will resume paying dividends.
They suffered in 2007 as the company suspended payouts because of problems with accounts and new systems ruined the results and plunged the company into losses. Two takeover suggestions from Sigma didn’t go anywhere because of problems with competition and Sigma’s own emerging operational strains.
That’s 18 months without income from their shares, and the shares have almost halved in the past year because of worries about the performance, accounts and the operation of the pharmaceutical retailing and distribution sector, which has seen a lot of stop start corporate activity.
API’s two nibbles were only part of a series of bids and counter bids from various groups that ended up seeing Primary Health Care snaffling Symbion for around $2.5 billion. Primary now has to sell Symbion’s consumer and distribution businesses which are better operations than those of API.
But at least API seems to be earning real money and can keep track of it: remember how a new computer system chewed up $17 million in sales 18 months or so ago?
That prompted the start of the dividend cuts as shareholders and other investors grew nervous about the company’s health.
But yesterday API reported an after tax profit of $6.1 million for the six months to February, but told shareholders they would not get a payout.
API said the board decided it would be prudent not to pay an interim dividend, but dangled a carrot in front of shareholders by saying that this stance would be reviewed at the end of the second half.
The shares fell 6c to $1.30 and looked weak. Perhaps it was the disappointment of the dividend being again omitted. They have ranged from a high of $2.48 and a low of $1.14.
API says it is comfortable with market expectations for its full year earnings and says it’s on track to improve the business and expects the improving performance to continue in the second half of the 2008 year.
"API remains comfortable with consensus forecasts of earnings before interest and tax (EBIT) of approximately $49.5 million," it said. It earned an EBIT of $29.7 million in the February half.
Net profit for the half year was $6.147 million.
There was no direct comparable earnings figure, after the company changed its reported year end date to August 31 from April 30.
But for the half year ended October 31 2006, API said it made a loss of $17.265 million.
Sales rose almost 20% in the half to $1.605 billion as the join venture with Alphapharm contributed four months of sales.
API managing director Stephen Roche said in a statement that the results demonstrated the company was on track with its business improvements and that its strategic position was sound, with better returns from its Pharmacy division as it grew the Priceline Pharmacy brand.
"We expect our improved performance will flow into the second half, particularly with the full benefit of the Alphapharm partnership and the planned sale of corporate stores to transition to Priceline Pharmacies," Mr Roche said.
