The AGL Energy Ltd (ASX: AGL) share price is under scrutiny today after the energy company rejected a second bid.
AGL rejects second bid
The company announced this morning that it had rejected a second bid from the consortium which included Brookfield Asset Management and Grok Ventures (which is Mike Cannon-Brookes’ investment entity).
This second bid was $8.25 per share. The first offer was $7.50 per share. That means this offer was 10% higher than the first one.
Compared to the pre-bid price, the second bid represented a 15.2% premium to the AGL Energy closing share price of $7.16 on 18 February 2022.
Why did AGL reject this bigger bid?
AGL Energy’s chairman Peter Botten said that this latest offer still ignored the opportunity that AGL Energy shareholders have through the proposed demerger.
Mr Botten thinks that this demerger of the retailing business and energy generation business will create value for shareholders because each business will be able to be valued separately and more positively by the market, with separate dividend and capital structures for each company which will help future growth and allow both companies to “responsibly decarbonise without impacting energy reliability and affordability”.
AGL also rejected the bid because it supposedly ignores the momentum that the company has recently seen through its “solid” half-year result, strong progress on the demerger, strong interest in the Energy Transition Investment Partnership and the improvements it’s seeing in forward wholesale prices.
Will there be another bid?
It seems that there won’t be.
Mike Cannon-Brookes said on Twitter that the consortium is “putting down our pens down – with great sadness”.
He then said:
Our path was the world’s biggest decarbonisation project. From Aus.
The board are proceeding with their demerger path. This path is a terrible outcome for shareholders, taxpayers, customers, Australia and the planet we all share 🌏
Shareholders now vote on that path
AGL share price thoughts
The AGL share price has surged 45% from the mid-November price. It will be interesting to see if the price drops back to where it was or not.
The leadership seem very confident about the demerger plans, but investors seem a bit less convinced about that path.
I’m not personally looking to buy AGL shares. Shareholders could well decide to vote no on the demerger, or they may kick up a fuss and want AGL to consider a takeover.
