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UPDATED: AGL rejects surprise takeover offer

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Power company AGL Energy has rejected a multi-billion takeover bid from Australian tech billionaire Mike Cannon-Brookes and Canadian investment firm Brookfield.

The preliminary and non-binding offer comprising $7.50 per share was received from Grok Ventures and Brookfield on Saturday, AGL confirmed.

The target’s board on Monday said the offer “materially undervalues the company on a change of control basis and is not in the best interests of AGL Energy shareholders”.

But, Mr Cannon-Brookes, who made his fortune through software company Atlassian, and Brookfield don’t appear to be about to give up.

“There’s always a back and forth in these things,” he said.

“We’ll continue to work with them (AGL) and continue to talk with shareholders about why we believe our path for the company is a better one.”

The offer represented a 4.7 per cent premium to the company’s closing share price of $7.16 on Friday when AGL’s market value was about $5 billion.

The AGL board stressed it remains committed to its plans to demerge the company and split it into two listed entities – energy retailer AGL Australia and electricity generator Accel Energy – by 30 June.

“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 actions on decarbonisation,” chairman Peter Botton said in a statement.

On this point, Mr Cannon-Brookes does not agree. 

He said he does not think the demerger plan is sensible and that the Brookfield-led consortium could decarbonise AGL’s business much faster.

AGL’s two proposed entities have been assigned emissions reductions targets that likely won’t be met for more than 10 years.

AGL Australia is expected to achieve a 50% reduction in emissions by 2030 and Accel Energy would achieve a 55-60% reduction no later than 2034.

Accel Energy will have to bring forward the closure of the Loy Yang A Power Station in Victoria to 2045, from 2048, and to close the Bayswater Power Station, located between Muswellbrook and Singleton in the Hunter Valley, by 2033, from 2035 previously.

“The company does not have the capital to fund that transition,” Mr Cannon-Brookes said.

“And as a public company, it can’t do it as fast as we could do it as a private company and that spread creates reliability and stability.”

Mr Cannon-Brookes said the demerger plan is “not good for the climate, it’s not good for the economy, it’s not good for customers, not good for shareholders”.

“It’s the largest emitter in Australia but it also has a huge potential opportunity to be a big part of decarbonisation.

“It’s not just the purchase of the company itself, it’s the extra $20 billion in capital” the consortium wants to bring in to fund AGL’s transition, he added.

The bid comes more than 10 days after AGL posted its 2021/22 first-half results.

AGL’s bottom line first-half net profit came in at $555 million, after last year’s result was hit by significant one-off items resulting in a more than $2 billion loss.

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