Cannon-Brookes demands two AGL Energy board seats

The power generator and retailer should prepare for its demerger to be voted down, the Atlassian billionaire warns in a letter.

Mike Cannon-Brookes wants two board seats at AGL Energy if he succeeds in dumping a demerger.

Mike Cannon-Brookes has demanded two AGL Energy board seats if he succeeds in defeating a controversial demerger and said the company should prepare for the restructure to be foiled.

In a letter sent to AGL chairman Peter Botten on Friday afternoon, the Atlassian co-chief executive reiterated his “unequivocal opposition” to the demerger taking place and said his family investment firm Grok Ventures wanted to collaborate with the board on realising the company‘s immense potential.

“We are therefore seeking two nominees for Grok Ventures on the board of AGL. We intend to engage directly with you and your fellow AGL Directors in relation to board and management renewal. We want to ensure that AGL has the talent, capital, capability and oversight that is required to embrace the opportunity presented by decarbonisation,” Mr Cannon-Brookes wrote.

The billionaire, who has control of 11.3 per cent of AGL shares, said he was available “at any time” to discuss the issue with AGL.

“In the meantime, I strongly encourage you and the AGL board to start preparing for AGL’s future including the potential outcome that the demerger does not proceed.”

The split needs approval from 75 per cent of shares voted to proceed with a demerger meeting set for June 15.

Mr Cannon-Brookes has previously said the position of the board, led by Mr Botten, would be untenable if the demerger failed, saying they had presided over a near 70 per cent loss of shareholder funds in five years.

The power operator plans to split off AGL Australia, with its 4.5 million customer base, into a newly listed retail-focused company with the current AGL to be rebadged as a coal-dominated generator called Accel.

With AGL’s 150,000 strong small shareholder base accounting for half of its register, the battle to win over retail investors remains a critical path for Grok ahead of next month’s vote.

The Australian Shareholder Association said on Friday it was in the process of arranging a webinar for its members with Grok to hear Mr Cannon-Brookes’ perspective on the merger. It plans to release a report next week outlining the issues and helping members decide how to vote.

“As he has noted it is not his role to outline an alternative path for AGL, but members have asked for greater detail to help them make their voting decision,” ASA chief executive Rachel Waterhouse said.

Mr Cannon-Brookes did detail a range of options for the company to consider last week with coal to be phased out by 2035 and green loans made to customers to switch households to 100 per cent renewable electricity.

Industry super fund HESTA was joined by London-based activist investor Snowcap this week in saying it would vote against AGL’s demerger, as Grok builds momentum to derail the company’s planned split.

HESTA chief executive Debby Blakey says the super funds was not convinced the demerger plans would help accelerate AGL’s decarbonisation to meet Paris-aligned targets, nor manage the risk of stranded assets.

The decision of the $68bn fund manager to go public with its opposition suggests Mr Cannon-Brookes arguments that AGL’s path to reduce carbon emissions will be easier if it remains in one piece are resonating with institutional investors, raising the prospect that the board-backed demerger could struggle to win shareholder support.

High profile fund manager Geoff Wilson also emerged as an opponent of the split, but AGL has said the demerger represented “decisive action towards decarbonisation” and will enable AGL Australia and Accel Energy to responsibly accelerate the transition faster than as one company.

Morgan Stanley noted this week that Australian demergers over the past 20 years have usually led to outperformance, with the highest return over a two-year period where 20 out of 26 companies still trading post demerger beat the ASX 200.

Still, it pointed to a number of uncertainties including a volatile energy market, evolving policy environment, climate overlay driving capital structures and an under appreciation of the abatement implications from early coal closures.

AGL rose 3 per cent to $8.87 on Friday.