Australia's Origin rejects BG bid

Origin is Australia's second-biggest power retailer

Australian energy firm Origin has rejected a 13.6bn Australian dollar ($13bn; £6.6bn) takeover offer from the UK's BG Group.

Origin rejected BG's offer after it doubled its estimate of its reserves of coal seam gas.

Shares in Origin hit a record high after news of the rejection, on hopes of an improved offer or a rival bid.

BG, which had already raised its offer from an initial approach of A$13bn, said it was "surprised" at the move.

The UK firm said it was now considering its options.

Rising value

BG had originally made a A$13bn approach for Origin in April, before improving the offer.

In a statement, BG said that until Thursday the two sides had been "putting the final touches to the agreement".

Origin said its rejection of the offer followed a 121% increase in its coal seam methane reserves.

It was also influenced by news that Malaysian oil firm Petronas was paying $2.5bn for a 40% stake in a liquefied natural gas plant in Queensland planned by Australian energy firm Santos.

"Based on these recent developments, the board has decided that the revised proposal does not adequately reflect the greater value that will be available to shareholders by not accepting this proposal," said Origin chairman Kevin McCann.

Origin's shares jumped by more than 10% in news of the rejection, but then fell back slightly to end the day up 6.9& at A$15.60.

Paul Johnston, an analyst at Commsec Securities, said: "It's not a surprise that Origin would turn it down. Santos' transaction yesterday has really set a new benchmark for the price of coal seam gas."

BG said that it had received a draft copy of Origin's report into its reserves, but had concluded that the report's "assumptions and conclusions were unrealistic".