AGL rejects takeover from Brookfield, Grok consortium

AGL Energy (ASX: AGL) has rejected an ambitious target to shut down all the company’s coal-fired power stations by 2030 after knocking back a $4.9 billion takeover bid from a consortium led by Brookfield Asset Management and including Grok Ventures.

In an ASX announcement released today, AGL said the $7.50 per share proposal was received on the morning of 19 February, but was refused on the basis the offer “materially undervalues” the company.

The offer represents a 4.7 per cent premium to the company's closing price of $7.16 on Friday, but is still well short of a price above $9 as recently as June last year, although it has recovered from a $5.27 per share level at the end of November. 

“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.

Grok is the private investment vehicle of Atlassian co-founder and CEO Mike Cannon-Brookes, who believes the takeover would steer AGL away from operating its coal stations by the end of 2030.

“Decarbonisation is the greatest economic opportunity facing Australia, but it requires vision and action” he told ABC’s RN Breakfast this morning.

“What Grok along with Brookfield are doing to purchase 100 per cent of AGL in that offer is to take that action," he told the broadcaster. 

“We need to sharpen our exact dates from working with the company over time. That said, we’re fairly confident we can retire coal capacity by 2030.”

Cannon-Brookes has pledged to invest $1.5 billion in renewables over the next decade.

The latest proposal also indicates Canada-based Brookfield is hungry for more after another consortium it led recently acquired Melbourne-based electricity and gas distributor AusNet Services (ASX: AST)  for $18 billion after entering a bidding war with APA Group (ASX: APA) for the operator.

In its latest half-year report, AGL recorded a profit of $555 million, indicating the company has made a significant recovery after reporting a $2.2 million loss in the prior comparative period.

Underlying EBITDA stood at $723 million, reflecting a 21 per cent dop compared to the same time last year.  

In lieu of a takeover, AGL says it remains committed to progressing the proposed demerger of the company to establish two separately listed businesses – AGL Australia and Accel Energy – which it believes would bring better value to shareholders.

The move to demerge was proposed on 31 March 2021 and would see Accel forward coal closure dates to no later than 2033 for Bayswater Power Station and 2045 for Loy Yang A Power Station. It would also aim for net-zero emissions by 2047.

The closures would follow the shutdown of Australia's largest coal-fired power station - Eraring Power Station - which Origin Energy (ASX: ORG) announced last week would cease operating by August 2025. 

“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 demergers as both proposed organisations pursue decisive action on decarbonisation," Botten said.

Cannon-Brookes has indicated the rejected bid will not be his last proposal.  

“It’s obviously disappointing, we’ve been trying to work with the board through the weekend and will continue to move forward,” he said.  

“We think our bid has significant value for shareholders and is a far better option than the alternative path – which is the demerger that’s on the table.”