The contracts allow the deal to be largely debt funded, limiting the equity raising needed by Beach to $301 million. That compares to earlier estimates that Beach, which has a market value around $1.5 billion, could need to sell $700 million-plus of new shares to buy Lattice.

Seven Group chief executive Ryan Stokes, a Beach director, described Lattice as "a really strong fit" for Beach with its range of assets that diversifies its production and reserves.

It also reinforces Seven's strategy of expanding in energy as it rebalances its business to de-emphasise its traditional powerbase of media and building out petroleum and industrial services.

"Seeing Beach get bigger is a key focus for us," Mr Stokes said, adding that backing the Beach bid is an effective way for Seven to participate in the evolving east coast gas market "in a meaningful way".

Beach chief executive Matt Kay described the acquisition as "transformational" for Beach, enhancing its growth opportunities and adding offshore and overseas fields to a portfolio currently limited to central Australia's Cooper Basin.

As Beach was the front-runner to buy Lattice, the deal was largely expected. But Dermot Woods, at Westoz Funds Management, said it was "good to have the certainty out there", and to have indications of the gas prices in the supply contracts between Origin and Lattice.

While both parties declined to reveal the price of the contracts, Mr Kay said it was higher than Beach's average realised gas price in 2016-17 of $6.10 a gigajoule. The tariff would increase in three annual step-ups, linked to the inflation rate, then move to "market prices".


"One can assume they are going to have a rising gas price for the next four or five years," Mr Woods said. "Name another commodity company you can say that about."

Mr Stokes said Origin's keenness to get security of supply and certainty over gas prices worked in favour of the funding structure.

"That enables you to use leverage because you take the commodity risk out of it," he said.

Beach will take on up to $1.58 billion of new debt, from ANZ, CBA and Credit Suisse, to help fund the deal and provide working capital, while some existing debt will be refinanced.

Gearing will jump towards 35 per cent, but should be under 25 per cent by mid-2019 and Beach could be net cash by mid-2021, Mr Kay said.

The shares will be sold at 75¢ apiece, a 9.1 per cent discount to Wednesday's close. Beach stock was halted from trading for the institutional part of the 3-for-14 rights offer.

Origin, whose shares edged up 5c to $7.50, initially proposed a float of Lattice in its December restructuring to simplify its business and lift shareholder returns. But market watchers immediately suggested a trade sale was more likely.

Chief executive Frank Calabria said the sale "represents the best overall value" to Origin shareholders but insisted the IPO remained "a very credible alternative" to the end.


The deal largely brings to an end Origin's asset sale program, with Mr Calabria saying the only remaining one being "actively considered" is the smart metering business Acumen.

JPMorgan analyst Mark Busuttil described the deal as "broadly positive" for Origin, which he calculates should be able to repay $1 billion-$1.1 billion of debt.

But some analysts saw it as expensive for Beach, with SHA Energy Consulting's Scott Ashton saying it was "enough to at least discourage an IPO".

Andrew Mitchell at Ophir Asset Management said the price "looks acceptable" for both companies' shareholders.

"Origin now has certainty and an attractive price, while the key deal metrics are accretive for Beach," Mr Mitchell said.

Seven has committed to taking up its full allocation of stock and will also sub-underwrite the offer, meaning its stake in Beach could rise to about 26 per cent.

Beach is being advised by Credit Suisse and Luminis Partners, while Macquarie and UBS are advising Origin.

Origin retains its 37.5 per cent stake in the APLNG project as well as major undeveloped assets such as the Ironbark coal seam gas field in Queensland and the promising Beetaloo unconventional gas project in the Northern Territory.