Origin (ASX:ORG) share price slips on $42 million acquisition

The Origin Energy share price is anything but electric today, despite its latest acquisition…
The post Origin (ASX:ORG) share price slips on $42 million acquisition appeared first on The Motley Fool Australia. –

The Origin Energy Ltd (ASX: ORG) share price is struggling to gain momentum on Monday. This follows an announcement from the energy provider revealing it is acquiring community energy services business WINconnect Pty Ltd.

At the time of writing, Origin’s shares are swapping hands for $5.05, down 0.98% from its previous closing price.

Today’s fresh acquisition announcement follows reports last week from the energy producer and retailer. Origin Energy was showing interest in potentially investing more in its highly successful venture in British renewable energy company Octopus Energy.

Expanding through acquisition

It seems investors aren’t too thrilled with Origin Energy’s latest acquisition news. The announcement has been met with some selling pressure on the ASX’s third-largest-listed utility company.

According to the release, one of Origin’s subsidiaries has entered into an agreement to acquire WINconnect. The Hawthorn-based company operates embedded networks mainly in Victoria and New South Wales. These services essentially involve the onselling of utilities to residents of apartment blocks, retirement villages, etc.

Furthermore, the deal will see changes made to Origin Energy’s master services agreement with Intellihub — a provider of metering solutions. The changes involved most notably include an increase in meter volumes. In addition, Intellihub will acquire both Origin’s and WINconnect’s electricity embedded network meters.

Both Intellihub and WINconnect are majority-owned by Pacific Equity Partners, making it the primary party involved in the transaction with Origin.

With both parties acquiring assets from each other, the best way to look at the transaction is from a net perspective. As such, the net amount payable by Origin Energy is slated to be $42.4 million post-tax. Yet, the deal has failed to excite the Origin share price today.

Following the deal, the energy provider will boast an additional 87,000 customers. A further 36,000 contracted apartments await connection in the pipeline. On completion of the acquisition, Origin’s community energy services business will total 367,000 customers.

Origin CEO Frank Calabria commented on the announcement:

The acquisition of WINconnect is a strong fit for Origin, aligning to our retail strategy to expand our existing presence in the embedded networks market. Since 2018, Origin’s CES [community energy services] business has experienced strong growth with customer accounts increasing by 78 per cent.

Origin Energy share price recap

The Origin Energy share price has managed to keep itself in the green since the beginning of this year. However, it has failed to outperform the S&P/ASX 200 Index (ASX: XJO). The nearly $9 billion energy giant has experienced a share price gain of 5.2% so far this year. Meanwhile, the benchmark index is up 8.9%.

Though, the company has dished out 20 cents per share in dividends in 2021. This equates to a dividend yield of 3.96% based on the current share price.

However, Origin Energy’s 12-month trailing revenue has been in a state of decline since the end of 2018. Shareholders might be cautiously waiting to see a return to growth.

The post Origin (ASX:ORG) share price slips on $42 million acquisition appeared first on The Motley Fool Australia.

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More reading

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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