Brookfield Consortium’s Improved Offer for AGL Is Rejected

Author of the article: Bloomberg News David Stringer and Harry Brumpton (Bloomberg) — Australian utility AGL Energy Ltd. rejected an improved multibillion-dollar takeover approach from Brookfield Asset Management Inc. and billionaire Mike Cannon-Brookes, who wanted to accelerate the firm’s transition to net-zero emissions by more than a decade. The consortium’s revised offer of A$8.25 ($6.08)…
Brookfield Consortium’s Improved Offer for AGL Is Rejected

Author of the article:

Bloomberg News

David Stringer and Harry Brumpton

(Bloomberg) — Australian utility AGL Energy Ltd. rejected an improved multibillion-dollar takeover approach from Brookfield Asset Management Inc. and billionaire Mike Cannon-Brookes, who wanted to accelerate the firm’s transition to net-zero emissions by more than a decade.

The consortium’s revised offer of A$8.25 ($6.08) a share — an 11% premium to Friday’s close and higher than the A$7.50 tabled last month — remained below the fair value of the company, Sydney-based AGL said Monday in a statement. The offer valued AGL’s equity at about A$5.4 billion, according to Bloomberg calculations.

Brookfield and Cannon-Brookes’ Grok Ventures would now be “putting our pens down — with great sadness,” the billionaire said Sunday in a Tweet, indicating another proposal probably won’t be forthcoming. Brookfield declined to comment. 

AGL fell as much as 3.1% in early Monday trading and was 0.5% lower as of 12:19 p.m. in Sydney. 

AGL, formed in 1837, is responsible for the largest share of Australia’s scope-one greenhouse gas emissions, and has faced criticism over its plans to continue operating giant coal plants into the 2040s. 

The company aims to separate its power generation assets and electricity retailing business via a demerger to be completed by the end of June. AGL is seeking about A$1 billion from potential partners for an investment vehicle to fund the transition, people familiar with the matter said last month. 

Brookfield and Cannon-Brookes, a co-founder of software developer Atlassian Corp. and Australia’s fourth-richest person, insisted they could generate more value by abandoning that strategy. The partners pledged to deliver a A$20 billion transition plan to close down coal assets faster and replace them with cheaper renewable energy. 

AGL should engage with the consortium as some investors remain uncertain over the demerger strategy, said Jamie Hannah, deputy head of investments and capital markets at Van Eck Associates Corp., which owns the utility’s shares.

“We do think AGL should open its books for full due diligence to the consortium now,” Hannah said. “They have shown a lot of interest and we are on board with what they are trying to do.” 

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Shareholders are scheduled to vote on AGL’s plans in mid-June. Under the proposal, the existing company will be renamed Accel Energy and house the company’s power plant fleet and a handful of renewables projects. A retail arm serving more than 4 million customers will be spun off as AGL Australia. 

“The proposed demerger will be a catalyst for the potential realization of shareholder value,” AGL Chairman Peter Botten said in the statement. “It will allow each business to be valued separately and more positively by the market on the basis of their own specific business fundamentals.”

©2022 Bloomberg L.P.

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