The Origin Energy Ltd (ASX: ORG) share price may continue to rise if the experts at Macquarie are correct.
The ASX energy share agreed on a revised takeover bid from Brookfield and MidOcean several months ago for A$5.78 and US$2.19 per Origin share. This takeover offer will be reduced by dividends paid by Origin prior to completion.
At the time of this announcement, the implied consideration was A$8.91 per share, implying an enterprise value of $18.7 billion for Origin. This was a 53.4% premium to the $5.81 Origin share price on 9 November 2022, being the last trading day prior to the initial proposal.
In addition, a 4.5 cents per month 'ticking fee', accruing on a daily basis, will be payable if implementation of the scheme is delayed beyond 30 November 2023.
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This offer may not be enough
According to reporting by The Australian, Macquarie believes that the offer is too cheap because it undervalues Australia's largest electricity and gas retailer. The Australian suggested that this call by the investment bank would increase the pressure on Brookfield and MidOcean to improve the bid.
While Origin did accept the offer earlier this year, Macquarie's analysts have suggested that Origin's underlying value had increased and that a fair value would now be between $9.49 to $10.08 per share.
Those figures imply that a fair Origin share price would be 10.9% to 17.75% higher than it is right now.
At the time of the bid being accepted by the board, Origin said:
The Origin board considers the revised proposal has the potential to deliver significant value to shareholders, and accordingly, intends to continue to progress discussions with the Consortium, including the negotiation of a SID [scheme implementation deed], while assessing the execution considerations and risks associated with the revised proposal.
What next for Origin shares?
In its FY23 result, Origin advised that the proposed acquisition continued to "progress through the necessary regulatory steps". The scheme and the board's recommendation are subject to an independent expert concluding the takeover is in the best interests of shareholders. That independent expert process is underway.
The timing of the shareholder vote is "uncertain" as it relates to the timing of regulatory approvals, but the parties are moving towards trying to implement the takeover by early 2024.
Shareholders could choose to vote no on the takeover unless the offer is increased, so it'll be interesting to see how this plays out.
It's worth noting that since 9 November, the AGL Energy Limited (ASX: AGL) share price has risen 44% amid strengthening conditions. It's possible that the Origin share price could also have risen substantially since then without the influence of this takeover attention, so shareholders may have a point if they ask for a stronger offer.
