Australia's AGL Energy spurns $3.5bn surprise bid; investors expect more

AGL Energy Ltd, an Australian listed public company, has recently rejected an impressive $3.54 billion seizure strategy from Canada's Brookfield Asset Management and Mike Cannon-Brookes, in favor of a planned split in two years.

According to AGL, the A$7.50 apiece offer at a 4.7% premium from the Canadian group and Cannon-Brookes, the 2nd richest man of Australia and software firm Atlassian’s co-founder, to the stock's close on Friday undervalued it.

AGL Chairman Peter Botten has said that the proposal does not provide a sufficient premium for change of control and is not in the best interests of AGL Energy shareholders.

AGL's shares jumped around 13% recently to a high of A$8.09, echoing the investors' view that an advanced bid will arise.

According to Botten, the spontaneous cash proposal with an option for the shareholders of AGL to elect a scrip alternative offered limited other information about how the deal would be arranged.

Investors see AGL as hard to value, given the unpredictability of electricity prices in the rushing transition away from coal-fired generation.

Chief investment officer of Vertium Asset Management, Jason Teh has apparently claimed Cannon-Brookes and Brookfield would require a low cost of capital for generating a good return from the switch to renewables.  

He further expressed his concern regarding how this will be done, as transitioning from coal to renewables will be a massive challenge for AGL.

Brookfield has announced its intention to address the proposal soon. However, Cannon-Brookes and his investment vehicle Grok Ventures are yet to respond to the request for comments.

Australia's major polluter AGL has been beaten by sliding power prices over the past few years. The invasion of solar and wind power makes coal-fired plants more financially challenging to run 24 hours a day.

It plans to divide into two companies for rebuilding value, renaming its coal-fired power generation business Accel Energy and spinning off its retail division and renewable energy business as AGL Australia by June.

Source Credit - https://energy.economictimes.indiatimes.com/news/power/australias-agl-energy-rejects-3-5-bln-offer-investors-expect-more/89713633