A tech investor’s multi-billion dollar takeover bid of one of Australia’s largest coal-fire energy companies has been flatly rejected by the board.
Australian energy firm AGL confirmed that it had received a preliminary and non-binding offer to acquire all the shares in AGL at $7.5 (US$5.38) per share from investment firm Brookfield and tech billionaire Mike Cannon-Brookes— who has pledged over $500 million (US$360 million) in personal funds to fight climate change.
In response, AGL Energy’s board issued a media release on Feb. 21 saying that the takeover bid undervalued the company on the basis of a change of control in AGL and was not in the best interest of its shareholders.
“The proposal does not offer an adequate premium for a change of control and is not in the best interests of AGL Energy shareholders,” AGL Energy Chairman Peter Botten said.
However, Cannon-Brookes, the co-founder and co-CEO of software company Atlassian, and Brookfield were not willing to give up yet.
“There’s always a back and forth in these things,” Cannon-Brookes told ABC Radio in Sydney.
“We'll continue to work with them (AGL) and continue to talk with shareholders about why we believe our path for the company is a better one.”
The bid represented a 4.7 per cent premium to AGL’s closing share price of $7.16 (US$5.13) on Feb.18. At that point in time, the company had a market value of around $5 billion (US$3.59 billion).
The AGL’s board emphasised that it would proceed with the original plan to break down the current company into energy retailer AGL Australia and electricity generator Accel Energy by June 30.
“Under the unsolicited proposal, the board believes AGL Energy shareholders would be forgoing the opportunity to realise potential future value via AGL Energy’s proposed demerger as both proposed organisations pursue decisive actions on decarbonisation,” Botton said in a statement.
Both AGL Australia and Accel Energy have received their carbon emissions reductions targets; however, the two entities are not likely to be able to achieve them in more than ten years.
AGL Australia is anticipated to reduce its carbon emissions by 50 percent in 2030, while Accel Energy’s deadline to slash 55-60 percent of its emissions is 2034.
In addition, Accel Energy will have to shut down the Loy Yang A power station in Victoria three years ahead of the previous deadline of 2048 and bring forward the closure of the Bayswater power station in the NSW Hunter region to 2033, from 2035 previously.
The move by Accel Energy to close the two coal-fired power stations ahead of time is in line with the accelerated trend of energy transition in the sector to catch up with policymakers and regulators.
Nevertheless, Cannon-Brookes disagreed with AGL on the demerger.
He told the ABC that he did not believe it was wise to demerge the energy company and that the consortium led by Brookfield could decarbonise AGL’s business much faster.
“The company does not have the capital to fund that transition,” Cannon-Brookes said.
“And as a public company, it can’t do it as fast as we could do it as a private company, and that spread creates reliability and stability.”
Cannon-Brookes said the prospect of AGL’s demerger plan was not favourable for the climate, the Australian economy, and the company’s customers and shareholders.
“It’s the largest emitter in Australia, but it also has a huge potential opportunity to be a big part of decarbonisation,” he said.
“It’s not just the purchase of the company itself. It’s the extra $20 billion in the capital the consortium wants to bring in to fund AGL’s transition.”
The takeover offer came more than ten days after the release of AGL’s first-half results for the 2021/22 financial year.
The energy company reported achieving a first-half net profit of $555 million after suffering a net loss of $2.06 billion (US$1.48 billion) in 2021 due to long-term off-take agreements between AGL and wind farm developers over a decade ago.
