Originally Posted by
Silverlight
Currently it would cost Origin 1.3b AU at market prices to buy the other 49% of Contact, and if they have to add 20%+ in premium they have to pay 1.6b AU plus. While Origin could get the funding from current debt facilities, the ROE and ROIC is significantly lower than they need to make such a move given other projects they are involved in.
Origin make about 5-600m AU in profits a year and have to fund nearly 8b in capex requirements for their stake in Australia Pacific LNG, with many expecting that Origin may have to do another capital raising as their debt to equity is at 19% already, compared AGL energy is under 10%, granted though AGL exploration is very small.
Purchasing Contact, which has even higher debt to equity (32%) at a premium, does not make financial sense for Origin at this stage, as it would increase their current debt levels, and lead to a re-rating profile of the price by analysts to higher risk, at a time when they may need to raise more capital anyway.
While from the point of view of retail holders, the price is lower than 1 year ago, Origin could be purchasing shares on market using the creep provision I doubt a full takeover would happen at the moment as it is not the place they can get the best return for their investment dollar