Auction heats up

If there is one thing that could de-rail Origin Energy's plans for another ASX-listed spin-off, it is Beach Energy.

The $1.27 billion Beach is the most likely buyer of Origin's Lattice Energy and it will take either a strong bid from either a rival buyer or the initial public offering path to knock it off.

As the auction heats up, Street Talk understands that Beach Energy has drafted in another investment banking adviser.

Sources said Luminis Partners had been hired to advise Beach Energy's board and help keep its bulge bracket advisers honest.

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While Beach Energy locked in Credit Suisse's team to run the bid months ago, any offer would likely require a big funding package, which is where Luminis' expertise is expected to come in.


Luminis Partners is expected to help the board decide on the best course of action when it comes to both the bid and funding options. Lattice Energy is expected to be worth $1.5 billion to $2 billion, which would represent a big bite for the mid-market oil and gas stock.

A Beach Energy spokeswoman declined to comment on Wednesday.

Fund managers expect Beach Energy to bid hard for the assets, which fit within the Seven Group-backed company's acquisition strategy.

RBC Capital Markets analysts recently told clients that Beach Energy could use a combination of debt and "what we currently consider to be relatively fully valued scrip". Since then, though, Beach shares have dropped from 71¢ to be trading at 66¢ on Wednesday.

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The analysts said Beach Energy had both the means and motivation to make the deal work, and said a deal could be done with an $800 million to $1 billion debt package and $700 million to $900 million equity raising.

Such a raising would represent between 50 per cent and 70 per cent of Beach Energy's existing shares on issue, and be the second largest follow-on raising for an M&A deal in Australia this year.

As for Luminis Partners, it is not known as an oil and gas advisory house, however has close ties to Origin.

The firm advised Origin on its $NZ1.8 billion divestment of a stake in NZ power supplier Contact Energy in 2015.


Beach Energy is expected to come up against ASX-listed rival Senex Energy and a bunch of offshore private equity buyers in its bid for Origin's assets, which includes stakes in the Otway, BassGas, Halladale and Cooper Basin fields.

The alternative is an IPO bid, put together by Macquarie Capital, UBS and Bank of America Merrill Lynch.


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