British utility BG Group has offered A$13 billion (US$12.1 billion) for Origin Energy, Australia's
second-largest power retailer, as it looks to establish itself as a major player in the Pacific region, sending Origin's shares up nearly 40 percent.
Origin said in a statement that BG's proposed offer, which it had yet to consider, was at A$14.70 per Origin share. That represents a 40.4 percent premium to Origin's Tuesday close of A$10.47, according to Reuters calculations.
"Its a pretty high price and premium. And it's all cash so its going to be hard for Origin to turn it down," said Sydney-based Jason Mabee, a utilities analyst at ABN AMRO.
Shares in Origin jumped as much as 39.4 percent to a life high of A$14.60, and traded 37.5 percent higher at A$14.40, indicating investors were not expecting a better offer.
"I would have thought it'd be hard to get competing interest. It's not as if it's a low offer putting it in play. This seems like a fairly full offer on face value," said Rohan Walsh, an investment manager at Karara Capital.
Two months ago BG paid A$664 million for a 10 percent stake in Australian coal seam gas producer Queensland Gas and some of its assets to start an A$8 billion liquefied natural gas (LNG) plant near the Queensland port of Gladstone.
BG and Queensland Gas plan to build a single-train LNG plant with capacity of 3-4 million tons a year. Analysts said Origin's extensive coal seam methane assets in Queensland could provide gas for a second plant.
BG, valued at around $86.5 billion, is one of the world's most active LNG traders and has long voiced the goal of expanding its position in the Pacific Basin, where LNG demand has been forecast to grow strongly.
Origin advised shareholders to take no action pending further announcements from the company.
Origin is the largest holder of coal seam gas resources in Queensland. It is also Australia's only vertically-integrated energy company with oil and gas production assets accounting for about a quarter of its revenues, which have helped offset tighter margins in its traditional retail energy business.
Local rival Santos, which also plans to build an LNG plant at Gladstone, could potentially throw in a rival bid for Origin, but the chances of that happening were fairly slim, analysts said.
"Santos could make a bid but it would be difficult for them to come up with a higher offer," said a Melbourne-based analyst who asked not be identified because of the sensitivity of the issue, adding BG had more financial muscle.
BG's offer for Origin sent Queensland Gas shares soaring more than 15 percent early on Wednesday, while coal seam gas producers Sunshine Gas and Arrow Energy, which also plan LNG plants near Gladstone, rose 3.6 percent and 8 percent, respectively.