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British energy company BG has launched a hostile $17.5 billion bid for Contact Energy's parent company Origin.
The bid for Australia's biggest producer of gas from coal seams comes after an earlier attempt at a friendly deal was rejected at the last minute by Origin's board of directors.
BG will bid A$15.50 a share in cash for all of Origin's stock, the Reading, England-based company said yesterday.
Origin turned down BG's approach at the same price per share on May 30, saying it didn't fully value its gas reserves.
The shares rose to a record in Sydney trading, above the offer price, showing some investors believe the bid may be increased.
In New Zealand Contact shares closed up 16c, or 2 per cent, for the day at $8.39.
There is still doubt about what the success of the BG bid might mean for the 51 per cent stake that Origin holds in Contact.
Last month sources close to BG indicated it may look to offload its stake - either in a trade sale, in sizeable chunks to institutional investors or even by floating the stake.
If BG is successful, the acquisition would be the second-largest foreign takeover of an Australian company after the US$14.2 billion ($18.7 billion) purchase last year of Rinker Group by Cemex, North America's largest cement producer.
Origin shareholders should take no action over BG's offer, the company said in a statement to the Australian stock exchange.
BG, the UK's third-largest oil and natural gas producer, is betting shareholders will be tempted by an offer which is 48 per cent higher than the original bid in April.
"Some Origin shareholders would be thinking long and hard about accepting this," said Gavin Wendt, resources analyst at Fat Prophets Funds Management in Sydney. "BG is giving itself room to move. This may not be the last offer on the table."
Origin shares rose as much as A93c, or 6 per cent, to an all-time high of A$16.45 and closed at A$16.42.
The stock has risen from A$10.47 on April 28, prior to BG's first approach at A$14.70.
BG said it would fund the bid with its own cash and a syndicated loan arranged by Banco Santander, HSBC, Societe Generale and Royal Bank of Scotland.
- AGENCIES
