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Brookfield Hurries to Preserve $12.6 Billion Origin Takeover Deal

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Brookfield's Last-Ditch Effort to Save $12.6 Billion Origin Takeover Deal

A consortium led by Brookfield Asset Management is making a final attempt to salvage its $12.6 billion takeover plan for Australian utility company Origin Energy. The group is seeking fresh talks with AustralianSuper, Origin Energy's largest investor, after a sweetened bid was rejected. While there is no guarantee that the talks will happen, Brookfield is determined to win over the giant pension fund. The options to be considered in the discussion may include joining forces. However, if this effort fails, Brookfield can proceed with its plans by increasing its shareholding and using a different takeover structure.

Challenges in the Australian Market

This rejection marks another setback for Brookfield in its attempts to invest in Australian energy firms that need capital for decarbonization. The Canadian giant had previously made an unsuccessful bid to acquire AGL Energy Ltd. Foreign firms interested in Australia's energy transition have faced difficulties, with domestic funds and local investors contesting takeovers. The involvement of prominent figures like Gina Rinehart in the lithium sector has also impacted foreign takeover bids.

The Current Proposal and Stakeholder Dynamics

Under the current proposal, Brookfield would acquire Origin's power generation and electricity retailing business, while EIG Global Energy Partners would take over the liquefied natural gas unit. AustralianSuper, after raising its stake in Origin, now holds about 15% of the utility's shares, potentially giving it the power to block the acquisition. The deal's fate will be determined at an investor meeting on November 23, where three-quarters of votes cast must support Brookfield's proposal for it to proceed.

Implications for New Businesses

Brookfield's struggle to secure its takeover of Origin Energy highlights the complexities and challenges new businesses may face when navigating mergers and acquisitions, particularly in sectors undergoing significant transition like energy. The resistance from AustralianSuper, a key stakeholder, underscores the importance of securing buy-in from major investors and the potential roadblocks they can present.

Understanding the Market

The difficulties Brookfield and other foreign firms have encountered in investing in Australia's energy transition also point to the need for new businesses to thoroughly understand the markets they are entering. This includes the regulatory environment, competitive landscape, and the attitudes of local investors and influential figures.
Strategic Adaptability
Finally, Brookfield's willingness to consider alternative strategies, such as increasing its shareholding or using a different takeover structure, illustrates the need for strategic adaptability. New businesses must be prepared to pivot and explore different approaches when faced with obstacles, ensuring their survival and success in a dynamic business environment.
Story First Published at: https://financialpost.com/pmn/business-pmn/brookfield-rushes-to-save-12-6-billion-origin-takeover-deal
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