In what has turned out to be an unsuccessful bid, Mike Cannon-Brookes and Canada’s Brookfield made an $8B bid for AGL. The consortium ensured they would invest a further $10B to replace its coal fired generators by 2030. Mike Cannon-Brookes is a well known investor in renewable energy through his involvement in the $20B Sun Cable project.
This latest move comes days after Origin Energy’s announcement to shut down Earring Power Station in 2025 and AGLs earlier announcement about the early retirement of Bayswater and Loy Yang Power Stations in the 2030s.
Over the weekend the AGL board met but rejected the $7.50 per share offer. As expected, this first approach was a lowball offer with room for the offer to increase.
The idea of the takeover will likely cause a headache for the federal government as we approach an election. Cannon-Brookes has indicated as well as a business plan he has a $20 billion war chest to spend on renewable energy to replace retiring coal-fired plants. The other headache is for the consortium partner, Brookfield which is currently procuring AusNet Services, the owner of electricity and gas transmission and distribution assets in Victoria.
AGL Energy’s board rejected the offer, telling shareholders to stick to a proposed demerger, which will separate the company’s coal fired generators from its retail business and investments in renewable energy projects.
The federal energy minister has been tight lipped on the offer but is likely to remind Australians of the increased risk to energy security if the Cannon-Brookes plan to accelerate the retirement of AGL’s coal fleet occurs.
If the proposal is eventually accepted it would allow a truly integrated business with Brookfields stake in AusNet, the group would control gas transmission, generation, electricity transmission, retailing and electricity distribution. This is likely to flag competition issues with the ACCC and the foreign investment board.
Following the rejection of the offer Cannon-Brookes said “AGL shareholders would be worse off if they stick with the power company’s demerger rather than if they accept his $5 billion joint bid with Brookfield to take the company private and get out of coal by 2030”.
Despite the offer being below the valuation of the whole AGL business, it is in line with the value of the retail arm of AGL.
Is AGL waiting for a counteroffer from another group such as Iberdrola or Ampol or do they believe coal fired generation will form an important part of the NEM for many years to come?