Australia's AGL rejects Brookfield, Grok Ventures bid

Brookfield and Grok first made an unsolicited approach for AGL in late February, proposing to buy the company through a scheme of arrangement at AUD 7.50 per share, a 4.7% premium to the previous close. They said existing investors could roll over their interests into the acquisition vehicle, subject to a 20% overall ownership cap.

This was rejected by AGL’s board, so the investors returned with an offer of AUD 8.25 per share, which equates to a market capitalization of approximately AUD 5.4bn (USD 4bn) and is said to value the company at AUD 8.5bn, including debt. AGL said in a statement that the revised bid didn’t reflect the recent business momentum or the value that will be created through its proposed demerger.

Cannon-Brooks said on Twitter that Brookfield and Grok would now walk away from what they envisaged as “the world’s biggest decarbonisation project.” He added: “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.”

AGL plans to split into two separately listed entities: AGL Australia, a multi-service energy retailer with a focus on distributed energy and low or carbon-neutral products and services; and Accel Energy, which will house the traditional coal-fired electricity business and drive a transition to low emissions industrial energy hubs and renewable energy projects.

AGL previously said it would achieve net zero emissions by 2050. Under the proposed demerger, AGL Australia would reach this target by 2040, with a 50% reduction on 2019 levels by 2030. It will also underwrite 3 gigawatts of new renewable generation capacity by 2030. Accel will start with 2.7 GW in renewables projects and reach net zero in its electricity generation portfolio by 2047.

Brookfield and Grok wanted to phase out AGL’s coal-fired power stations – which account for 8% of Australia’s greenhouse gas emissions – even earlier. They proposed significant investment in large-scale renewable energy and energy storage projects.

AGL generated AUD 10.9bn in revenue for the 12 months ended June 2021, down from AUD 12.2bn the previous year. Over the same period, net profit fell from AUD 808m to AUD 537m. The company sold 41,137-gigawatt hours of volume into the national electricity market, of which 4,686 GWh came from renewable sources.

AGL’s stock has fallen 71% over the past five years and 24% over the past 12 months. As of early afternoon trading on March 8, it was holding steady at AUD 7.30.

Cannon-Brookes and Scott Farquhar founded software provider Atlassian in 2002 and took it public in the US in 2015. Both have established private investment firms, with Farquhar’s interests managed by Skip Capital. They have backed a range of technology start-ups, including Culture Amp and Airwallex, as well as renewable energy players like Brighte.

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• Topics
• Australasia
• Infrastructure
• Buyouts
• Cleantech
• Australia
• Brookfield Asset Management
• Grok Ventures
• renewable energy
• energy