BG Group drops Origin bid

British natural gas producer BG Group PLC on Tuesday abandoned its hostile takeover bid for Origin Energy Ltd., Australia's second-largest power retailer.

BG Group, Britain's third-largest oil and gas company, conceded defeat after Origin announced a coal seam liquefied natural gas joint venture with U.S. energy giant ConocoPhillips valued at 9.6 billion Australian dollars ($7.9 billion). BG said the price for that investment indicated a takeover of Origin would be too expensive.

"The price implied by this newly announced joint venture is higher than BG Group is able to justify," said BG Group chief executive Frank Chapman in a statement to the London Stock Exchange. "We have therefore decided not to extend or amend our offer, which we expect will now lapse."

BG shares fell 4.3 percent to close at 1,046 pence ($18.55) in trading Tuesday.

BG had wanted Origin's gas resources in eastern Australia to feed a liquefied natural gas plant it is planning to build in Queensland state, but its approaches were repeatedly rebuffed.

Origin last rejected a sweetened 13.7 billion Australian dollar ($11.1 billion) offer in July, before unveiling the ConocoPhillips deal on Monday.

BG Group said it had canceled a shareholder meeting scheduled for Sept. 16 to vote on the offer. It added that Origin shareholders who accepted the BG Group offer will retain their Origin shares if the offer lapses as expected when the formal offer period ends on Sept. 26.

"We remain firmly committed to Australia and our existing LNG joint venture with QGC, which is progressing well," Chapman added in the statement.

Announcing the ConocoPhillips deal on Monday, Origin said that the U.S. company would make an initial payment of $5 billion to Origin, and carry Origin for the first $950 million in joint venture expenses.

ConocoPhillips would then make up to four more payments of $500 million each for the development of four gas-processing facilities in Queensland. ConocoPhillips will get a 50 percent stake in Origin Energy CSG Ltd., which holds Origin's Queensland, Australia, coal bed methane assets.

Production from the first two processing facilities is expected in 2014, with a capacity of about 3.9 million tons each per year.

Origin said the venture would wipe out its debt and increase its earnings per share by more than 35 percent in the year ending June 30, 2009.