BG concedes defeat in Origin bid

BG Group has conceded defeat in its pursuit of Origin Energy, after the target formed a $9.6 billion joint venture with US-based ConocoPhillips to commercialise its coal seam gas resources. The UK-based company today said it would not increase its $13.8 billion bid, comprising $15.50 cash per share, or extend the offer period for Australia's second largest power retailer.

"The price implied by this newly-announced joint venture is higher than BG Group is able to justify," BG Group chief executive Frank Chapman said.

"We have therefore decided not to extend or amend our offer, which we expect will now lapse.

Origin had rejected the offer after labelling the bid as "demonstrably inadequate" and failing to recognise the true value of its coal seam gas assets.

An independent expert report compiled by Grant Samuel & Associates and commissioned by Origin has valued the company's shares at between $28.55 and $30.71 a share.

CommSec senior analyst Paul Johnston said BG Group's withdrawal was not surprising.

"I don't think that anyone would be surprised at all," Mr Johnston said.

"It was an amazing transaction and BG can't compete with that."

The joint venture proposes the development of four LNG trains, or processing plants, in Queensland, with production from the first two 3.5 million tonne-a-year trains expected by 2014.
ConocoPhillips will be the downstream LNG operator and Origin will be the upstream coal seam gas operator, with a joint venture company established to market the LNG.

Merrill Lynch analysts said BG Group would have needed to almost double its bid for Origin if it wanted to scuttle the power retailer's joint venture with ConocoPhillips.

"With the (Origin) board reaffirming the independent expert's $28.55 to $30.71 per share valuation, we believe BG would need to nearly double its bid to obtain the support of the board and Origin's 40 per cent retail shareholding," Merrill Lynch said in a client note.

Origin shareholders who accepted BG Group's takeover offer will retain their Origin shares if the offer lapses as expected on September 26, BG Group said.

The UK company's holding in Origin is currently 0.15 per cent.

Increasing energy demand, particularly from Asia, has seen the entry of a number of large international players into the Australian coal seam gas sector, which are seeking to develop separate LNG projects for export to lucrative Asian markets.

International parties active in the sector include, Royal Dutch Shell, Malaysia's state-owned Petronas and BG Group.

Origin shares dropped 25 cents to close at $17.40.



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