AGL Energy has found that the proposal materially undervalues the company on a change of control basis and is not in the best interests of its shareholders


AGL Energy Board rejects proposal for acquisition. (Credit: Walter Bichler from Pixabay)

Australian electricity generation company AGL Energy has rejected a $3.54bn takeover offer proposed by a consortium led by Brookfield Asset Management.

The proposal, which represents a 4.7% premium to the closing price of AGL Energy shares on 18 February 2022, was a cash proposal.

It comes with an option for AGL Energy shareholders to elect a scrip alternative in the Brookfield Consortium’s acquiring vehicle. The consortium comprises Grok Ventures.

AGL Energy stated that the unsolicited proposal offered limited other information regarding the structure of the acquiring vehicle and the scrip alternative.

The proposal is subject to various other conditions and assumptions, including due diligence, and approvals from the Australian competition authority (ACCC).

According to the AGL Energy, the proposal materially undervalues the company on a change of control basis and is not in the best interests of its shareholders.

AGL Energy chairman Peter Botten said: “The proposal does not offer an adequate premium for a change of control and is not in the best interests of AGL Energy shareholders.

“Under the Unsolicited Proposal the Board believes AGL Energy shareholders would be forgoing the opportunity to realise potential future value via AGL Energy’s proposed demerger as both proposed organisations pursue decisive action on decarbonisation.

“Our locally developed, industry leading capability means that we are best placed to continue to serve the households and businesses of Australia, while delivering a responsible pathway to a decarbonised future.”

AGL Energy stated that it is committed to progressing the proposed demerger of AGL Energy to establish two separately listed businesses, AGL Australia and Accel Energy.

According to the company, the proposed demerger is expected deliver better value for AGL Energy shareholders, and create a strong future for both parts of the business.

Accel Energy would serve as vehicle manager, along with managing development, output marketing, construction, assets and dispatch.

Under the proposed merger, AGL Australia and Accel Energy will focus on supporting the development of renewable and flexible generation capacity.