AGL board declines higher offer – ShareCafe


Done and dusted in hours – a $9 billion offer for AGL shareholders left in an act of defiance from a recalcitrant board of directors all the way?

It’s an interpretation that can be placed on the Sunday afternoon news first, a 10% higher bid or 75 cents per share for AGL from tech billionaire Mike Cannon-Brookes and international asset manager Brookfield – then a few hours later, a rejection from the board of directors of the AGL.

The offer at $8.25 per share, down from $7.50 on a Sunday a few weeks ago, was rejected by AGL’s board of directors the same day and confirmed to market first thing Monday.

That leaves AGL’s stock price stuck at Friday’s close of $7.43, and it will quickly drop back below the $7.19 it was trading at before the auction opened in late February. It was trading as low as $6.17 in early January.

Mr Cannon-Brookes, the co-founder of software developer Atlassian, said in a tweet on Sunday that it was with great sadness that the consortium “put our pens down”.

“This weekend, the board rejected our increased offer of $8.25, which is 46% higher than the price of $5.55 about 90 days ago,” he said in a message on Twitter.

Mr Cannon-Brookes said the consortium’s proposal to spend between $10 billion and $20 billion on large-scale renewables and batteries to enable the early shutdown of AGL’s power plants which account for 8% of total gas emissions Australia’s greenhouse would have been the “biggest decarbonisation project in the world”.

But instead, the board was pushing ahead with its increasingly controversial plan to spin off its huge coal and gas-fired power plants into a separate entity known as Accel Energy and continue burning coal until in the mid-2040s, he said.

“This path is a terrible outcome for shareholders, taxpayers, customers, Australia and the planet we all share,” Mr Cannon-Brookes said.

AGL rejected the first offer, telling investors it believed the offer “significantly undervalued” the company and that it was not in their best interest to approve.

The consortium’s initial cash offer of $7.50 per share represented a 4.7% premium to the closing price of $7.19 before the announcement of the offer.

Justifying the board’s rejection of the initial offer, AGL chief executive Graeme Hunt insisted last month that a premium of 4.7% was far too low, given that redemption premiums often exceeded 30%.

On Monday, the same line was repeated by AGL Chairman Peter Botten, who said in a statement filed with the ASX early in the morning:

“The Revised Unsolicited Proposal continues to ignore the opportunity AGL Energy shareholders have through our proposed spin-off to realize potential future value.

“It also ignores the momentum we have recently seen in the business thanks to our strong half-year result, solid progress on the spin-off, strong interest in our energy transition investment partnership and the improvements we are seeing. in wholesale futures prices.

“The proposed split will be a catalyst for the potential realization of shareholder value. It will create two industry-leading companies with distinct value propositions. This will allow each company to be valued separately and more positively by the market based on its own specific business fundamentals.

It was self-interested as it implies that AGL is a strong and successful company with a bright future, but its fossil fuel-based generation fleet and associated assets were the reason shares fell more than $27 at the start of 2017. These assets have been unable to compete in terms of price or efficiency with the growing presence of renewables in the energy market.

That’s why AGL’s management and CEO, Graham Hunt, want to make it a standalone business that will underperform in the market (if someone finances it and insures its assets) with the retail, distribution and renewable energy in a new version of AGL.


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