AGL Energy has formally rejected a revised takeover bid from the Canadian asset manager Brookfield and the tech billionaire Mike Cannon-Brookes, seeing off the unsolicited bid that the suitors claimed would have been the world’s largest decarbonisation project.
The pair made an offer of $8.25 a share for Australia’s largest electricity generator on Friday night, topping their initial offer of $7.50 made last month.
AGL’s board met on Sunday and decided to reject the second offer, which is worth about $8.5bn when the company’s debt of about $3bn is included.
As expected, AGL’s shares opened lower, dropping 10 cents in early trading on Monday from Friday’s close, or about 1.4%, to $7.33.
“The AGL Energy board considered that 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,” the company said in a statement. As a result, it was “not in the best interests of AGL energy shareholders.”
AGL’s chairman Peter Botten said the revised unsolicited proposal continued to ignore “the opportunity” that shareholders would have once the company’s planned demerger into two separate firms would bring. By July, AGL plans to split into a mainly generating unit, Accel Energy, and a retailing entity, AGL Australia.
Both Cannon-Brookes and Brookfield, which was to stump up 80% of the bid, plan to walk away from further bids if the board rejected the revised bid.
Cannon-Brookes confirmed as much on social media on Sunday evening.
The Brookfield-Grok consortium looking to take private & transform AGL is putting our pens down - with great sadness.
— Mike Cannon-Brookes 👨🏼💻🧢🇦🇺 (@mcannonbrookes) March 6, 2022
This weekend, the board rejected our raised offer of $8.25. 46% more than the price of $5.55 about 90 days ago 🧵 (1/3) pic.twitter.com/c5KYwGozDo
The initial audacious bid had drawn opposition from the AGL board, which claimed it materially undervalued the company. The reasons for the second rejection will be made public before the ASX opens on Monday morning.
It’s understood that AGL’s board believed the higher offer also failed to take into account the company’s value, particularly after it breaks into a two separate companies in July.
The suitors had promised to accelerate AGL’s exit from coal, quickening the closure of all three coal plants by 2030 and making Australia’s biggest single greenhouse gas emitter carbon neutral by 2035.
The prime minister, Scott Morrison, also opposed an acceleration of the coal exit, saying assets should be “sweated” until the design date of their closure.
AGL already plans to shut its Liddell plant in the Hunter Valley of New South Wales by April 2023. Last month it said it would close its sister plant no later than 2035, and its Loy Yang A coal plant in Victoria’s Latrobe Valley by no later than 2045.
All three companies were approached for comment.
While the bidders indicating they would give up if the revised bid was rejected, one source questioned whether it might be tempted back if – as is expected – AGL’s shared take a plunge when trading resumes on Monday.
Interest in the company’s 4.5 million-strong customer base had been accentuated by the bid, and other suitors might make a tilt for the company even if Brookfield and Cannon-Brookes weren’t involved, one source speculated.
