The AGL Energy Limited (ASX: AGL) share price finished the session up 0.58% trading at $8.63 on Friday.
While the ASX utilities company made no official announcements to the ASX today, it was in the news.
Recap on the drama at AGL this year
To recap quickly, Atlassian billionaire Mike Cannon-Brookes and Canadian company, Brookfield tried to buy AGL outright earlier this year. On the day news of the first offer broke, the AGL share price spiked 9%.
The AGL board rejected both the first offer and a second improved offer of $8.25 per share. The board said the price was “still well below both the fair value of the company on a change of control basis and relative to the expected value of the proposed demerger”.
The board prefers to proceed with plans for a demerger of AGL’s energy retailing and energy generation segments. Cannon-Brookes reckons this is a bad move environmentally and for AGL shareholders.
So, what’s Cannon-Brookes doing now?
In short, Cannon-Brookes wants to block the demerger. Earlier this month, he purchased an 11.3% stake in AGL using derivatives. This made him the largest shareholder at AGL.
According to reporting in The Australian, Cannon-Brookes reckons former AGL Energy boss and US businessman Andy Vesey is against the company’s proposed demerger.
Cannon-Brookes, who is a passionate environmental advocate, apparently met with Vesy to seek his support in blocking the demerger.
According to the article, Cannon-Brookes said: “He is broadly supportive of what we are trying to do and he does believe very much in the opportunities for these assets to go in a different direction.”
When is the demerger vote?
The AGL board needs 75% shareholder approval at the vote on 15 June for the demerger to proceed.
If the demerger fails, Cannon-Brookes would like to see AGL phase out coal by 2035 and provide green loans to customers who want 100% renewable electricity in their homes.
Why does Cannon-Brookes want to keep AGL whole?
According to reporting in the Australian Financial Review (AFR), a memo received by shareholders in Cannon-Brookes’ Grok Ventures says he believes an integrated AGL Energy “could capture 30 per cent of the electricity retail market”.
The memo said AGL could achieve this “by closing its coal power stations by 2035 and offering customers 100 per cent renewable energy while expanding into energy finance products”.
The memo stated that moving to 100% electric could cost the average Australian home approximately $100,000. It said: “We believe converting this capital expenditure into operating expenditure is a challenge AGL can solve for customers.”
The AFR also reported that RBC Capital Markets considers the demerger’s value to shareholders as “subjective”.
The AFR quoted RBC analyst Gordon Ramsay:
In our view, shareholder benefits are opaque. After the demerger, shareholders will continue to own the same underlying assets in the same proportion, implying that the demerger value uplift argument is subjective.