Australia's Origin rejects BG Group bid

By Fayen Wong

PERTH (Reuters) - Australia's Origin Energy (ORG.AX: Quote, Profile, Research) urged shareholders on Friday to reject a $13.1 billion (6.6 billion pound) bid from gas company BG Group (BG.L: Quote, Profile, Research), as speculation grew over whether BG would raise its offer.

BG went hostile with its A$15.50 per share all-cash bid on June 24 after an earlier attempt at an agreed deal was rejected by Origin at the last minute.

BG wants Origin's vast coal seam gas resources in Australia to feed a proposed liquefied natural gas project on the country's east coast, which would help BG fill a hole in its LNG business in the Asia-Pacific.

Origin said in a statement that, following its original rejection, the firm has seen continued strong interest in the coal seam gas sector and still saw better value in making separate deals to either sell its coal seam assets or to enter in partnerships to supply a liquefied natural gas (LNG) plant.

The company has set a deadline of 7 p.m. local time (10 a.m. British time) on Friday for expressions of interest on its coal seam gas assets, and said it would update shareholders on the process soon.

Global energy majors that may be casting their eyes over Origin's coal seam gas assets include ExxonMobil Corp (XOM.N: Quote, Profile, Research), BP (BP.N: Quote, Profile, Research), Chevron (CVX.N: Quote, Profile, Research), Italy's ENI Group (ENI.MI: Quote, Profile, Research) and top Chinese oil firm CNPC, analysts said.

"There is a very high chance that BG will raise its offer. If they raised it by 50 cents or a dollar, it will move many shareholders," said Gavin Wendt, head of research at Fat Prophets Funds Management Ltd.

"The offer is very attractive considering current market volatility and a lot of shareholders are looking for an exit strategy now, but are just looking for a better price."