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AGL share price on watch as demerger scrapped

The energy giant has given up on its plans to split in the face of unrelenting opposition.

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Mitchell Lawler
Mitchell stumbled upon the concept of investing when in high school, devotedly urging his parents to put some money into a handful of technology companies with increasingly popular products among his demographic – many of which have gone on to great success. It wouldn’t be until 2017, some five years later, that Mitchell became an investor of his own money. Having studied and worked as a mechanical engineer in the building services industry, Mitchell takes a methodical and analytical approach to evaluating businesses. Rather than relying purely on numbers, Mitchell drills beyond a company’s metaphorical mantle to unearth obscure patterns or competitive advantages that would go otherwise unnoticed. His expertise resides within areas such as software, consumer goods, and building services equipment. However, his quest to find quality companies that set the industry standard and flex some degree of an impenetrable position has no limits – small cap to mega cap, cosmetics to healthcare – if it’s an exceptional business it’s on his radar.
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Key points

  • The AGL Energy share price is in focus on Monday as AGL gives up on its demerger plans
  • A strategic review will take place to evaluate the next steps forward
  • Key personnel, including CEO Graeme Hunt, will step down from the board

The AGL Energy Limited (ASX: AGL) share price could be in the firing line on Monday morning amid the latest developments in the demerger saga.

Reports by The Australian late yesterday afternoon suggested the country's largest energy retailer holds doubt on its prospects of receiving approval in the upcoming demerger vote. The energy giant has since confirmed the news ahead of the opening bell.

The development follows last week's news that Wilson Asset Management boss Geoff Wilson had also grown sceptical of the split.

Cannon-Brookes has it his way

While the Atlassian Corporation (NASDAQ: TEAM) co-founder Mike Cannon-Brookes was not the only opponent of AGL's intention to cut itself into two, he has certainly been the loudest.

From partnering up with Brookfield in a rejected $8.25 billion takeover bid, to quietly accumulating an 11.28% stake in the energy company — Cannon-Brookes has been unrelenting in challenging the proposal.

Yet, exactly 11 months on from the first mention of the radical AGL restructure, it appears the tech billionaire has prevailed. Shareholders will be watching intently to see how the AGL share price reacts to the news this morning.

According to the latest release, AGL Energy is withdrawing its proposal to break the company into AGL Australia and Accel Energy. Though, the board's decision appears to have been made begrudgingly. The announcement notes that the board still believes the demerger would have been "the best way forward".

However, with the strong opposition from the likes of Cannon-Brookes' Grok Ventures, the board thinks it is unlikely to get over the required 75% approval mark. As such, the energy company is canning the proposal and opting for a strategic review.

AGL share price in focus on board shake-up

ASX-listed AGL will also be seeking a new CEO following the decision for Graeme Hunt to step down from the role. Though, the shake-up of the board doesn't stop there.

In addition, chair Peter Botten, non-exec director Jacqueline Hey, and Diane Smith-Gander will all resign from the board.

It is believed that Mike Cannon-Brookes will seek to gain representation on the AGL board.

The AGL share price is up 44.46% since the beginning of the year.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Atlassian. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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