A revised offer for energy company AGL (ASX: AGL) from Brookfield Asset Management and Mike Cannon-Brookes’ investment company Grok Ventures has been rejected.
The company has reaffirmed that it intends to proceed with its previously announced demerger planned for completion by the end of June.
The demerger will establish two separately listed businesses, AGL Australia and Accel Energy. AGL Australia would retain the company’s coal-fired power stations and manage a transition to low emissions generation, while Accel Energy would focus on developing renewable and low carbon power generation.
AGL announced on 7 March that its board had rejected the Brookfield Consortium’s increased offer of $8.25 a share. The consortium had previously offered $7.50-per-share valuing AGL at $5 billion.
The company said: “The AGL Energy board considers the revised unsolicited proposal is still well below both the fair value of the company on a change of control basis and relative to the expected value of the proposed demerger, and therefore is not in the best interests of AGL Energy shareholders.”
AGL chairman Peter Botten said: “The revised unsolicited proposal continues to ignore the opportunity that AGL Energy shareholders have, through our proposed demerger, to realise potential future value.
“It also ignores the momentum we have recently seen in our business through our solid half-year result, strong progress on the demerger, strong interest in our energy transition investment partnership and the improvements we are seeing in forward wholesale prices.
“The proposed demerger will be a catalyst for the potential realisation of shareholder value. It will create two industry leading companies with distinct value propositions. It will allow each business to be valued separately and more positively by the market on the basis of their own specific business fundamentals.
“We have defined distinct dividend policies and capital structures for each company that will support both future growth and appropriate returns to shareholders, as both organisations pursue their commitment to responsibly decarbonise without impacting energy reliability and affordability.”
AGL said that, apart from the increase in the offer price, the revised proposal was materially the same as the proposal it had rejected on 21 February but it also included a requirement that AGL effectively commit to recommending acceptance to shareholders.
The Brookfield Consortium had provided along with the revised offer a draft confidentiality/ information access deed which included exclusivity (no talk and notification) and cost reimbursement obligations on AGL. The offer was also subject to other conditions and assumptions, including due diligence, approvals from the Australian Competition and Consumer Commission (ACCC) and Foreign Investment Review Board (FIRB).
AGL said that, in the absence of an offer which it considered reflected fair value, it intended to continue to pursue its demerger plan.
The revised offer represented:
- 15.2% premium to the closing price of AGL Energy of $7.16 on 18 February;
- 14.6% premium to the volume weighted average price (VWAP) since AGL’s first half 2022 financial year results announced on 10 February of $7.20;
- 14.7% premium to the one-month VWAP prior to 18 February of $7.19.
AGL’s shares, which had risen to $7.89 after the initial offer fell from $7.44 to $7.34 following announcement of the rejection of the revised bid.
Mike Cannon-Brookes commented on Twitter: “The Brookfield-Grok consortium looking to take private & transform AGL is putting our pens down – with great sadness. This weekend, the board rejected our raised offer of $8.25, 46% more than the price of $5.55 about 90 days ago.”
Macquarie Capital, Goldman Sachs and Herbert Smith Freehills are advising AGL.
Image: AGL’s Loy Yang coal-fired power station in the Latrobe Valley, Victoria.