Remember Paul Anthony, the well-coiffed Welshman with a penchant for pinstripes who was unceremoniously dumped as AGL boss last year and took home the equivalent of $1 million a month?
One of his grand plans was a proposed merger between AGL and Origin Energy, Australia's other main gas supplier.
The only problem was, while Anthony spent enormous amounts of time telling anyone within earshot of his brilliant plan, he never got around to discussing details with Origin's boss, Grant King, who rebuffed him and simply refused to engage.
After the British outfit BG Group's $13 billion takeover bid for Origin emerged yesterday, Paul Anthony is looking even more of a twit for screwing up the deal and putting Origin in the takeover spotlight.
The old British Gas - it was renamed after its retail operations were spun off a decade ago - has delivered what would appear to be a knockout offer, with a 40 per cent premium to the market price.
It's so generous that even hedge funds, which always punt that an opening bid won't be the last, yesterday refused to push the Origin share price above the offer.
BG has slapped $14.70 on the table. Origin shares peaked at just $14.60 yesterday and by the close of trading had slipped to $13.95. That's a little more than 33 per cent above the previous day's close but it's still a hefty discount to the offer.
Obviously a hell of a lot of investors were keen to get out early and take a huge profit upfront rather than wait for the formalities and a bit of extra change.
But it also indicates traders anticipate some regulatory problems, either through the Foreign Investment Review Board or the Australian Competition and Consumer Commission.
Australian energy is in hot demand at the moment. Our resources are near the growth economies of Asia and we have the infrastructure to process and transport them cheaply.
And that's exactly what BG's chairman, Sir Robert Wilson, has planned. BG only entered Australia a few months ago but has plunged in with abandon. In February it bought a 10 per cent stake in Queensland Gas and a 20 per cent stake in the Surat Basin coal seam gas fields, and announced plans to build a huge liquefied natural gas plant at Gladstone, in Queensland.
Wilson, who not so long ago was Rio Tinto's chairman, wants to export our LNG initially to Singapore and then other parts of Asia. That's where he may run into regulatory problems because by diverting that gas offshore he's likely to push up domestic prices.
In Western Australia, which has an abundance of LNG in its North West Shelf reserves, domestic consumers pay a much a higher price than their eastern states counterparts. Admittedly, the west has a much smaller population scattered over a huge area. But the bigger factor is that the vast bulk of North West Shelf gas is exported into lucrative markets.
It's those domestic price concerns that will determine the success or otherwise of this takeover.
At the moment BG doesn't have enough gas reserves to fulfil its obligations with Singapore - even if it snaps up Origin - let alone expand to other Asian markets.
That means it either has to buy more Australian gas reserves or producers, or allow other producers to use its export facility and share the loot. Either way, that means higher domestic prices.
Wilson and his chief executive, Frank Chapman, will attempt to sell the deal to Canberra on the grounds that it will invest in a new Australian export industry and create jobs. They may also have to give some sort of price assurance to the chairman of the Australian Competition and Consumer Commission, Graeme Samuel.
If the pair do succeed in dancing around the regulators, it will put even more pressure on AGL to make a move.
AGL has power stations and distributes gas. But it doesn't have gas reserves and, since its demerger with Alinta last year, it no longer owns the pipes.
You can bet your life Michael Fraser, who replaced Paul Anthony at AGL, is already casting an eye over the gas producer Santos, which is rudderless since the resignation in March of its long-standing boss, John Ellice-Flint, and is now being run in an acting capacity by David Knox.
For decades Santos has been takeover-proof, courtesy of South Australian legislation restricting investors to less than 15 per cent of the company. That shackle, designed to ward off Alan Bond in the 1980s, will go in November.
Santos's share price has risen strongly in recent months, partly due to higher energy prices and partly because the company will be properly priced by the removal of the ownership restriction.
Santos hasn't had a happy time with acquisitions. It lost out on Queensland Gas, missed Delhi Petroleum and recently was engaged in talks to buy the New Guinea based Oil Search, which appear to have come to nought.
Who will blink first? AGL or Santos?
STO Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
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