Australia’s AGL Energy rejects $3.5bn bid and backs decision to split

  • Australia’s 2nd richest man, Canadian Brookfield has made a joint bid
  • The offer was at a 4.7% premium to AGL’s last close
  • AGL says split plans are on track

Feb 21 (Reuters) – Australian power producer AGL Energy Ltd on Monday rejected a $3.54 billion takeover bid from billionaire Mike Cannon-Brookes and Canada’s Brookfield Asset Management (BAMa.TO) in favor of of its plan to split in two this year.

AGL said the proposal of A$7.50 each from Cannon-Brookes, Australia’s second-richest man and co-founder of software company Atlassian, and the Canadian buyout group represented a premium of 4, 7% from the stock’s close on Friday and undervalued it.

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

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The unsolicited cash proposal with an option for AGL shareholders to elect an alternative to certificates also provided other limited information about how the deal would be structured, Botten said.

Cannon-Brookes’ investment vehicle, Grok Ventures and Brookfield did not immediately respond to a request for comment.

Profits and the value of AGL, Australia’s biggest polluter, have shrunk under government pressure to cut retail tariffs, diminishing investors’ appetite for coal power and an influx of solar power and wind turbine in the network.

The Australian Financial Review had reported on Sunday that the parties had made a joint bid for AGL which planned to halt its proposed spin-off into a bulk power generator and carbon-neutral energy retailer.

AGL plans to rebrand itself as Accel Energy and own the company’s coal-fired power plant and wind farm contracts. It would transform AGL Australia Ltd, the country’s largest electricity and gas retailer, into a publicly traded company. Read more

AGL said earlier this month that it had made significant progress on its spin-off plans and reiterated on Monday that the spin-off was on track to be completed by June.

“The board is confident that the split will create a strong future for both parts of the business,” Botten said.

($1 = 1.3961 Australian dollars)

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Reporting by Harish Sridharan and Shashwat Awasthi in Bengaluru; edited by Grant McCool

Our standards: The Thomson Reuters Trust Principles.

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