Origin Shares Fall as BG Says It Will Let Offer Lapse

By Angela Macdonald-Smith

Sept. 10 (Bloomberg) -- Origin Energy Ltd., Australia's biggest producer of natural gas from coal seams, fell the most in 18 months in Sydney trading after BG Group Plc said it won't pursue a A$13.5 billion ($10.8 billion) takeover offer.

Origin dropped as much as A$1.14, or 6.6 percent, to A$16.26 on the Australian stock exchange. The shares, which have jumped 56 percent since BG first approached Sydney-based Origin with a merger proposal on April 29, were at A$16.34 at 10:56 a.m. local time. The exchange's benchmark energy index fell as much as 4.6 percent after crude-oil prices fell in New York.

BG, the U.K.'s third-biggest oil and gas company, yesterday conceded defeat in its hostile bid for Origin after the Australian company attracted an investment of as much as $8 billion from ConocoPhillips for a liquefied natural gas joint venture. The ConocoPhillips transaction, which needs approval from Australia's Foreign Investment Review Board, may be completed in late October, Origin said Sept. 8.

``With BG having now essentially declared itself out of the running for Origin, Origin may pursue the ConocoPhillips JV without shareholder approval, as foreshadowed by Origin management,'' Credit Suisse Group said today in a report.

The price implied by the ConocoPhillips deal is higher than the U.K. company is able to justify, BG Chief Executive Officer Frank Chapman said yesterday in a statement. The deal suggests a valuation for Origin of A$20 to A$26 a share, Merrill Lynch & Co. said in a Sept. 8 report.

Higher Valuation

BG bid A$15.50 a share for Origin, an offer that dropped to A$15.37 after Origin declared a final dividend of 13 cents a share.

Origin on Sept. 8 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.

BG said yesterday it remains committed to its existing Australian LNG venture with Queensland Gas Co.

Coal-seam gas, mostly comprising methane, bonds as a thin film on the surface of coal and is released when pressure is reduced, usually after water is removed.

LNG is natural gas that has been chilled to liquid form, reducing it to one-six-hundredth of its original volume for transport by ship to destinations not connected by pipeline.

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