In an ASX filing on Monday, AGL Energy revealed it has rejected an unsolicited, preliminary, non-binding indication of interest from a consortium by Brookfield Asset Management and Mike Cannon-Brookes’ Grok Ventures to acquire 100 per cent of the shares in AGL Energy for $7.50 per share by way of a scheme of arrangement.
The bid, received on 19 February, was rejected on the basis that it “materially undervalues” the company and is not in the best interests of AGL Energy 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,” said AGL Energy chairman, Peter Botten.
“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 action on decarbonisation.”
The AGL Energy board confirmed it remains committed to progressing the proposed demerger of AGL Energy to establish two separately listed businesses, AGL Australia and Accel Energy, and considers the proposed demerger will deliver better value for AGL Energy shareholders.
The structural separation proposal was made on 31 March last year, with the separation scheduled for completion by 30 June 2022.
At the recent results announcement, AGL Energy outlined climate commitments for both proposed organisations that, it said, “demonstrated decisive action on decarbonisation”.
“These commitments strike a balance between enabling Australia’s current and future energy needs and the need to responsibly decarbonise, without impacting energy reliability and affordability,” Mr Botten said.
“Under these commitments, AGL Australia would achieve 50 per cent reduction in emissions by 2030 and Accel Energy would achieve a 55-60 per cent reduction in emissions by no later than 2034, with the potential to bring this forward should the system be ready.”
Brookfield and Cannon-Brookes respond
Following AGL Energy’s decision, Brookfield and Grok Ventures issued a joint statement, voicing their disappointment and referring to AGL Energy’s decoupling plans as “potentially value destructive”.
According to the statement, the bid’s intention was to help AGL Energy achieve net zero emissions by 2035.
“It is intended AGL will be net zero by 2035,” the statement said.
“The consortium is committed to working with all stakeholders and regulators to ensure the transition is achievable. Serving the company’s customers will remain the primary focus.”
Earlier this month, AGL brought forward the planned closure of the Bayswater black coal plant in NSW to no later than 2033 and Loy Yang A Power Stations in Victoria to 2045.
Responding to AGL’s announcement at the time, the Minister for Energy, Angus Taylor, noted that, while it is a commercial decision, “the exit of such a considerable amount of reliable generation is a concern for the continued reliability and affordability of the system”.
“Energy is an essential service, and the Morrison government expects the market to step up to keep the lights on and prices low.”
Commenting on the takeover bid on Monday, Treasurer Josh Frydenberg reiterated Mr Taylor’s worries.
“We need to ensure that our coal‑fired generation of electricity runs to its life, because if it doesn’t, electricity prices go up, they don’t go down,” Mr Frydenberg told media.
“Our government is very committed to ensure we sweat those assets for their life to ensure that businesses can get access to the electricity and energy that they need at affordable prices to keep people in jobs.”
