AGL Energy shareholder Van Eck tells Mike Cannon-Brookes to sweeten $8bn takeover offer
A top AGL Energy shareholder, VanEck Australia, agrees with an early coal exit but says the Mike Cannon-Brookes-fronted consortium will have to raise its $8bn bid.
One of AGL Energy’s top shareholders says the Mike Cannon-Brookes-fronted consortium will have to significantly hike its $8bn takeover bid to gain traction with investors even while it remains cautious on the merits of the power giant’s planned demerger.
The tech billionaire and his investment partner, Canada’s Brookfield, lobbed a $7.50 a share offer which was rejected by AGL’s board as too low and has left initial talks between the pair at a temporary stalemate.
One of AGL’s top 10 shareholders, VanEck Australia, said the electricity operator was right to rebuff the buyout even though it agreed with the bidders’ controversial pledge to shut the company’s coal plants by 2030 to help fast-track a move to become a green-dominated generator.
“It‘s just not a good enough price,” VanEck Australia’s deputy head of investments and capital markets, Jamie Hannah, said.
“What it comes down to is $7.50 doesn’t take into account the long-term benefits of AGL. It’s certainly had a terrible five-year share performance, I won’t argue that. However, it’s just trying a very opportunistic price down at $7.50, when it is at such a low.”
AGL itself has said the investment consortium will need to boost its takeover bid by at least another $1bn to be taken seriously even as its suitors said they planned to both seek meetings with shareholders, engage with the company’s board and potentially bring in more funding partners to get a deal over the line.
A higher price would be required to tempt most shareholders, Mr Hannah said, adding it had not yet been approached by the investors for talks.
“They’ll definitely need to go higher to get engagement for sure. Yes, it rallied up on the day they made the announcement and it’s obviously pulled back below that now. I’m not going to give a level but they definitely need to make it attractive for current shareholders to be willing to sell.”
While VanEck backs AGL to exit coal earlier than its planned retirement dates, it said the other big issue it continued to grapple with was understanding the merits of its corporate split.
Shareholders in the 180-year-old electricity company are set to vote on a plan to split it into two companies, a green retailer named AGL Australia seeking to be fully carbon-neutral by 2040, and a coal-dominated generator, Accel Energy, targeting net-zero emissions by 2047. However, VanEck said it was still waiting for more detail on the split.
“We do think that it’s still a good company but the demerger? We’re yet to be sold on that,” Mr Hannah said.
“We need to see more on it. And we need to understand also the ESG considerations in that one of the companies is obviously going to be lumped with a lot of the bad assets. We need to understand more before we are a buyer of this demerger situation.”
The investment duo led by Mr Cannon-Brookes has pledged $20bn of capital to fund the transition of AGL’s generation fleet consistent with the 1.5 degree target outlined in the Paris climate accord, with a scheme to replace 7 gigawatts of capacity through “a build-out” of at least 8GW of clean energy and storage.
AGL has said that will not be enough generation to replace the twin coal plants exiting.
AGL’s giant Bayswater coal plant in NSW and Loy Yang A station in Victoria would close by 2030 under the bid, but the billionaire said power prices would not increase once the plants shut and it has $20bn to deploy in clean energy investment and storage to back up renewables.
AGL fell 1.3 per cent to $7.42 on Tuesday.