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Origin Energy Ltd (ASX:ORG) share price jumps higher on ACCC takeover decision

The Origin Energy Ltd (ASX: ORG) share price is up close to 5% after the takeover of the ASX energy share was approved.

Origin is one of the largest energy generators and retailers in Australia. It has been the subject of a suggested takeover by Brookfield. But, the deal was subject to approval by Australian Competition and Consumer Commission (ACCC) because of the amount of market power that Brookfield may have.

Origin Energy Ltd (ASX: ORG) share price

Approval for Origin and Brookfield deal

It was announced today that the ACCC has granted authorisation for Brookfield and MidOcean Energy to buy Origin. We’ve already seen this year how the ACCC can affect the ASX share market with its rulings, such as with Qantas Airways Limited (ASX: QAN).

This authorisation was granted on the basis of undertakings provided by Brookfield, AusNet and MidOcean.

The Brookfield Global Transition Fund will own Origin’s energy markets business, including Origin’s electricity generation and electricity and gas retail businesses. MidOcean will own Origin’s upstream gas interests.

While the ACCC thinks that this acquisition could be likely to substantially lessen competition, it suggested that the deal could result in stronger public benefits that would outweigh the likely public detriments.

ACCC commentary

The ACCC Chair Gina Cass-Gottlieb said:

We found that the public benefits and public detriments in this matter were finely balanced. Likely detriments, particularly anti-competitive effects from vertical integration, had to be weighed against likely benefits to Australia’s renewable energy transition. We considered undertakings offered by Brookfield, AusNet and MidOcean in this weighing process.

The ACCC considers that the acquisition will likely result in an accelerated roll-out of renewable energy generation, leading to a more rapid reduction in Australia’s greenhouse gas emissions.

The Brookfield Global Transition Fund has been specifically established to focus on the transition to renewable energy. Its decision to buy Origin, Australia’s fourth largest emitter of greenhouse gases, is driven by a strong imperative and commercial incentive to lower emissions quickly.

The ACCC concluded that an accelerated build-out of Origin’s renewable energy generation would be a material benefit to the Australian public. An accelerated build-out by Origin will assist in lowering Australia’s emissions by replacing
some fossil fuel generation earlier than would occur without the proposed acquisition. The ACCC considers that a reduction in greenhouse gas emissions is a public benefit of considerable weight.

Final thoughts on this deal for Origin shares

Origin signed a takeover deal with the consortium for a deal price of A$5.78 and US$2.19 per Origin share. At the time of the deal, that implied a total offer of A$8.91 per share.

Major investor AustralianSuper has suggested that the takeover price is not enough to warrant being accepted. So, Brookfield and its partners may need to increase its offer to get across the line. The energy market has improved for Origin since a lot since the original offer, which could justify a stronger price.

It’ll be interesting to see what price it takes for AustralianSuper and other investors to accept it. If I were a shareholder, I wouldn’t sell just yet.

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