Australia’s competition watchdog has conditionally approved private equity firm Brookfield’s A$18.7 billion ($12 billion) takeover of the nation’s largest energy producer, Origin Energy Ltd.
The Australian Competition and Consumer Commission said Tuesday it would wave through the Canadian investment firm’s takeover, in league with EIG Global Energy Partners-backed MidOcean Energy, for the utility. The proposed deal is the third-largest in the country so far this year, according to data compiled by Bloomberg.
“After a detailed review, we are satisfied that the proposed acquisition is likely to result in public benefits that would outweigh the likely public detriments,” ACCC Chair Gina Cass-Gottlieb said. “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 sign-off is a rare positive for both the retreating tide of megadeals, which have fallen off in 2023 as rising interest rates crimped financing and corporate confidence, as well as for the deal itself, which had to be renegotiated due to a nationwide price cap on domestic natural gas enacted in 2022.
The takeover, which was agreed in March, is still subject to a shareholder vote. AustralianSuper, the nation’s biggest pension fund and Origin’s largest investor, said last month that the Australian utility is being undervalued. The current pact values Origin at A$8.912 per share, while the stock closed at A$8.73 on Monday.
Origin rose as much as 5.5% to A$9.21 at 10:20 a.m. in Sydney. The authorization is granted on the basis of undertakings published by the ACCC and the company will provide shareholders with more information in the coming weeks before the vote, it said.
Under the plans, Origin will be broken up and EIG will take the liquefied natural gas unit, one of Asia Pacific’s largest. Meanwhile, Brookfield plans to invest to decarbonize Origin’s large utility and generation business, which serves more than 4.5 million homes and businesses and currently runs Australia’s biggest coal plant. Origin’s board previously said it would target completion of the deal in 2024.
The Australian competition regulator in August shot down ANZ Group Holdings Ltd.’s A$4.9 billion agreement to buy Suncorp Group Ltd.’s banking arm, citing competition concerns. ANZ and Suncorp have lodged an appeal against the decision. The watchdog last year blocked the proposed network sharing agreement between Telstra Group Ltd. and TPG Telecom Ltd.
(Updates with share price move in sixth paragraph)