AGL Energy rejects Brookfield-led A$8.5bn revised takeover bid

Brookfield and Grok Ventures will no longer bid for the Australian energy giant, after the consortium's latest offer was deemed ‘well below’ the fair value of the firm

Additional reporting by Dominic Webb.

AGL Energy has rejected an A$8.5bn ($6.3bn; €5.8bn) revised takeover bid from a consortium led by Brookfield Asset Management, reports affiliate title Infrastructure Investor.

The revised, unsolicited and non-binding proposal to acquire 100 percent of the Australian-listed company for A$8.25 per share ahead of its proposed demerger was put forward on Friday and rejected by the company’s board on Sunday. It follows a previous failed bid of A$7.50 per share made by the consortium last month.

In a statement, the company said: “The AGL Energy board considers 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, and therefore is not in the best interests of AGL Energy shareholders.”

The company’s shares were sitting at A$7.43 before the market opened on Monday morning.

The consortium – which also comprises Australian private investment firm Grok Ventures, owned by billionaire Atlassian co-founder Mike Cannon-Brookes and his wife Annie Cannon-Brookes – is not expected to pursue a further revised offer for AGL Energy. Brookfield confirmed to Infrastructure Investor today that the consortium is “no longer active on the transaction”.

As part of its bid to take over AGL Energy, the consortium had intended to invest a further A$10 billion in the business to accelerate the closure of the energy giant’s coal-fired power stations. It is understood Brookfield’s Global Transition Fund was to have held an 80 percent stake in the partnership, with Grok Ventures holding the remaining 20 percent.

“The Brookfield-Grok consortium looking to take private and transform AGL is putting our pens down – with great sadness,” Mike Cannon-Brookes said on Twitter yesterday.

“Our path was the world’s biggest decarbonisation project. From [Australia]. The board are proceeding with their demerger path. This path is a terrible outcome for shareholders, taxpayers, customers, Australia and the planet we all share.”

The Brookfield bid had won investor support for its climate impact potential. Speaking after the rejection of the first offer, Don Hamson, Managing Director at $4bn manager Plato Investment Management, a supporting investor on the Climate Action 100+ engagement with AGL, said that if the Brookfield consortium did what it said it was planning to do, it would be a “huge net positive for climate change in Australia”.

“AGL has the highest carbon emission of any company listed on the ASX with 42.7m t CO2e emissions in FY21, and has been slow to transition away from coal fired electricity generation”, he added.

“Whilst the offer is light on price, the consortium provides the necessary capital to transition AGL to renewables, something we believe the existing break-up plan for AGL does not do”.

John Pearce, Chief Investment Officer at Australia’s UniSuper, said at the same time that the fund had minimal exposure to AGL, but that the accelerated closure of coal fired power stations was needed for Australia to meet the aims of the Paris Agreement.

“As AGL is Australia’s largest electricity supplier, their transition impacts the ability of many of our Australian investments to meet their emission reduction targets”, he said

Demerger plan

Announced in March last year and set to complete by 30 June, the proposed demerger will result in the establishment of two separately listed businesses, AGL Australia, which will be home to the company’s retail electricity business and its clean energy generation assets, and Accel Energy, which will house its legacy coal-fired power stations.

In a statement pointing to “strong progress on the demerger”, AGL Energy chairman Peter Botten said the consortium’s revised proposal “continues to ignore the opportunity that AGL Energy shareholders have through our proposed demerger to realise potential future value”.