INVESTMENT ACTIVITY
Power company AGL Energy (ASX: AGL) has rejected a preliminary non-binding indication of interest from a consortium led by Canada’s Brookfield Asset Management and including billionaire Mike Cannon-Brookes’ private investment vehicle Grok Ventures.
The $7.50-per-share proposal values AGL at $5 billion.
In a 21 February announcement, AGL said its board had determined the unsolicited proposal materially undervalued the company and was not in the interests of shareholders. The market appeared to agree with the share price closing above the offer price at $7.82 on the day of the announcement.
AGL said it remained committed to progressing its proposed demerger, due for completion by the end of June. The demerger would 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.
The company said financing arrangements from public and private markets for both proposed successor companies had been completed. The AGL board believed the demerger would maximise value for shareholders and offered better value than the current Brookfield Consortium proposal.
Atlassian co-founder Cannon-Brookes, whose Grok Ventures team is believed to have come up with the basis of the consortium proposal, disagrees.
On television and in press interviews he maintained that AGL shareholders would be better off to accept the bid and let the consortium take AGL private and lead it to exiting coal power generation by 2030.
Under its demerger plan, AGL expects its two Victorian brown-coal fueled power stations Bayswater and Loy Yang to remain in operation into the 2030s and possibly beyond.
Cannon-Brookes said the consortium had developed a complete business plan and was prepared to invest $20 billion in replacing aging coal-fired power stations.
As a private business with substantial capital and expertise behind it, the consortium would be able to achieve the energy transition more efficiently and faster than through AGL’s demerger plan.
The offer would also be better for controlling electricity prices to consumers and maintaining the reliability of the national electricity grid.
Macquarie Capital, Goldman Sachs and Herbert Smith Freehills are advising AGL.
Image: AGL’s Loy Yang power station in Victoria’s Latrobe Valley.