BG Launches $13.8 B Offer for Origin

123jump.com Staff
23 Jun, 2008
New York City

BG Group, UK based energy company hopes that an offer taken directly to the shareholders of Origin Energy Limited may succeed better than the same offer rejected by the management earlier in May. BG offered $15.50 per share or A$13.8 billion for Origin in all cash. The fundamental difference between the current offer and the management expectations is in the valuation of the CSG reserves. Origin stock rose 5% to A$16.30 and has surged 60% in the last two months of trading.

[R]11:30PM New York, 1:30PM Sydney – BG Group launches cash offer for Origin Energy at $13.8 billion or $15.50 per share.[/R]

BG Group plc launched a hostile offer for coal to seam gas producer Origin Energy Limited.

The deal which was first proposed to the company in April of this year represented 58% premium to Origin‘s closing price on April 29 at $10.47 per share. The offer values the company at $15.50 per share or $13.5 billion. BG believes that taking the offer to shareholders will likely improve the prospect of the deal. Origin rejected the proposal in April and is likely to recommend to shareholders to reject the offer again.

BG in its statement to the Australian Stock Exchange said, “Origin does not have sufficient CSG reserves for a LNG joint venture: there are third-party contractual rights over a large number of Origin’s tenements that have not been adequately explained; and Origin’s domestic market requirements from CSG exceed the company’s currently available proven reserves.”

Origin decided to not present the offer to shareholders after several discussions with BG and a transaction in the industry also raised the prospect of a higher offer at a later dat.

Santos Limited and Malaysia based Petronas agreed on a joint venture to take coal seam gas to liquid natural gas or LNG.

BG estimates that up to 45% of the reserves after the recovery of cost will be passed on to third parties at no benefit to Origin.

BG also states that the recent agreement between Santos and Petronas values the gas reserves at $0.70 per gigajoule and only two days later the payment $435 million by Royal Dutch Shell to Arrow CSG valued the reserves at 45 cents per gigajoule.

BG also cautions in its statement that if Origin pursued the development of CSG field on its own it may take $8 billion at current prices and may generate its first revenue at the earliest in 2015.

BG Group has arranged funding for the offer of $13.8 billion through its own cash reserves and a syndicated loan arranged by HSBC, The Royal Bank of Scotland, Banco Santander and Societe Generale Investment Banking.