ASX 200 rises, Telstra up, AGL sinks

The ASX 200 rose today after a big asset sale by Telstra.

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The S&P/ASX 200 Index (ASX: XJO) went up by around 0.2% to 7,313 points.

Here are some of the highlights from the ASX:

Telstra Corporation Ltd (ASX: TLS)

The Telstra share price went up 4.4% today in response to the company announcing the sale of 49% of its business for $2.8 billion.

A consortium made up of Future Funds, Commonwealth Superannuation Corporation and Sunsuper will buy almost half of the Towers business.

It’s the largest mobile tower infrastructure provider in Australia with around 8,200 towers.

The transaction values Telstra InfraCo Towers at $5.9 billion. Telstra expects net cash proceeds after transaction costs of $2.8 billion at completion and the Towers entity will have no debt.

Andrew Penn, the CEO of Telstra, said:

Telstra’s objective in seeking a strategic partner has been to maximise overall value for our shareholders, maintain control of the assets and agree terms that secure Telstra’s mobile network leadership and competitive differentiation into the future. I am pleased that we have been able to achieve that ahead of schedule through this transaction announced today.

We had previously intended to commence the process to seek external strategic investment in the Towers business in early FY22, with a view to completing any transaction by the end of the 2022 calendar year. We were approached by the consortium earlier in the year as they recognised the value of these assets and provided a compelling rationale to progress the transaction ahead of schedule. We believe the value of the transaction; the high calibre consortium members and the terms of the agreement which protect Telstra’s network differentiation, support our decision to accelerate the process.

Telstra said that it intends to return approximately 50% of net proceeds to shareholders in FY22. The ASX 200 share anticipates providing further details about the manner of the shareholder return, including a potential share buy-back in FY22 at its full-year results in August. The remainder of the proceeds will be used for debt reduction to ensure it maintains balance sheet strength and flexibility.

AGL Energy Ltd (ASX: AGL)

The AGL share price fell around 10% after giving a business update.

AGL said its board believes proceeding with the proposed demerger will be in the best interests of shareholders, protecting value and providing greater strategic focus.

AGL Energy will become Accel Energy, a baseload power producer focused on redevelopment of its sites as low-carbon industrial energy hubs.

Accel Energy will demerge AGL Australia, one of the country’s leading multi-product energy retailer backed by flexible energy trading, storage and supply.

The ASX 200 company said that there is strong support from lenders for new borrowing facilities for both entities.

It’s anticipated that completion of the demerger will be in the fourth quarter of FY22, subject to relevant approvals.

Accel Energy will retain a minority ownership interest of between 15% to 20% of AGL Australia after the demerger.

AGL also said its underlying earnings before interest, tax, depreciation and amortisation (EBITDA) is expected to be within the lower half of its previous range of $1.59 billion to $1.85 billion.

Underlying net profit after tax (NPAT) is expected to be around the middle of the previous range of $500 million to $580 million.

For FY22, AGL expects a material step-down of earnings as a result of lower wholesale electricity prices of the past two years now being realised through forward sold positions, as well as the non-recurrence of insurance proceeds and increases to wholesale gas supply costs.

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