Arb funds gird loins for G-CG ruling

afr.com:

It’ll be a nervy and sleepless night for the global M&A arbitrage funds waiting on the ACCC’s decision on Brookfield and EIG’s $18.7 billion bid for Origin Energy.

Sure, the takeover has gone through some highs and lows. It was recut from $9 per share to $8.91 in February as the government threatened more regulation for the energy sector, only for shareholders to agitate for a higher offer after profits climbed higher than expected in September.

But there won’t be any deal, at least for now, if it gets the thumbs down from the competition watchdog’s boss Gina Cass-Gottlieb on Tuesday.

The ACCC is chaired by former corporate lawyer Gina Cass-Gottlieb. Alex Ellinghausen

It’s understood about 10 per cent of the share register is in the hands of global arb funds, which buy into companies that are the subject of takeover deals and hope to pocket the spread between their share price and the offer price.

For those who bought on the day Origin announced the takeover, November 10, 2022, when the share price opened at $7.94, that’s a tidy 12 per cent margin. But if the deal breaks and shares settle below $7, it could spell disaster.

Cass-Gottlieb is considering two main questions: is there a net public benefit to the deal going through that would enhance renewable energy investment, and whether the deal would hurt competition in the energy market?

On the latter, Brookfield has promised to ring-fence Origin Energy markets business from AusNet, the energy grid business it purchased in early 2022, as a divestiture is not possible. Meanwhile, EIG has given the ACCC an undertaking that it will not share sensitive information about LNG marketing between Origin and two lesser-known energy ventures in Queensland.

The public benefit