BG Concedes Defeat in Origin Bid After Conoco Venture

By Angela Macdonald-Smith

Sept. 9 (Bloomberg) -- BG Group Plc, the U.K.'s third- biggest oil and gas company, conceded defeat in its hostile bid for Origin Energy Ltd. after the Australian company attracted an investment of as much as $8 billion from ConocoPhillips.

The price implied by the venture announced yesterday between ConocoPhillips and Sydney-based Origin is higher than BG is able to justify, BG Group Chief Executive Officer Frank Chapman said today in a statement distributed on the Regulated News Service.


ConocoPhillips, based in Houston, will buy a 50 percent stake in Origin's coal-seam gas unit and in a proposed liquefied natural gas venture in northeastern Australia to tap rising Asian demand. The transaction represents a premium of about 33 percent for Origin's gas reserves compared with BG's A$13.5 billion ($10.9 billion) offer, Sanford C. Bernstein & Co. said yesterday.

``I don't think anyone will be surprised'' at BG dropping the bid given the price of the ConocoPhillips transaction, said Paul Johnston, a utilities analyst at Commonwealth Securities Ltd. in Melbourne. ``It is an extraordinary transaction. I think Origin are a bit surprised themselves that they could elicit this type of value.''

Origin, Australia's biggest producer of natural gas from coal seams, today closed at A$17.40 in Sydney trading, down 1.4 percent, after jumping 13 percent yesterday. BG offered A$15.50 a share for Origin, which dropped to A$15.37 after Origin declared a final dividend of 13 cents a share. BG rose 0.2 percent to 1,095 pence at 8:22 a.m. in London trading after gaining 5.8 percent yesterday.

Valuation Range

Origin yesterday announced an assessment by an independent expert, Grant Samuel & Associates Pty, that valued it at between A$28.55 and A$30.71 a share. The valuation, which assumed the transaction with ConocoPhillips is completed, assessed Origin's coal-seam gas unit alone at between A$18.70 and A$19.49 a share, more than Reading, England-based BG offered for all of Origin, which is also Australia's second-biggest electricity and gas retailer.

``We have therefore decided not to extend or amend our offer, which we expect will now lapse,'' Chapman said in the statement. ``We wish Origin and ConocoPhillips every success with their joint venture.''

BG remains committed to its existing Australian LNG venture with Queensland Gas Co., Chapman said.

The U.K. company would have needed to almost double its offer to obtain the support of Origin's board and of Origin's 40 percent retail shareholding, Merrill Lynch & Co. said in a Sept. 8 report.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net