There is a lot going on with the AGL Energy Limited (ASX: AGL) share price right now. Yes, AGL shares have shed 0.54% or thereabouts so far today at $7.38 a share. But that’s not the most exciting happening with this company.
Last month, AGL was sensationally on the front page as billionaire Mike Cannon-Brookes launched a surprise bid for the stalwart energy utility company. Cannon-Brookes made the $7.50 a share bid for AGL through his private company Grok Ventures. It was in partnership with the Canadian investment house Brookfield Asset Management.
Cannon-Brookes, if successful, intends to halt AGL’s planned demerger of its generation and retail arms that the company is planning to execute this year. He also wants to rapidly accelerate AGL’s decarbonisation plans, and close the company’s coal-fired power plants as early as possible in order to transition into renewable energy generation.
AGL’s management was quick to reject the offer, saying it vastly undervalues the company. However, we might not have read the last chapter of this gripping tale just yet.
For one, AGL is fighting a battle of its own right now. Not all shareholders are on board with the demerger plans. As my Fool colleague Tristan covered last month, the activist London-based AGL investor Snowcap has described the demerger plans as “value destructive and environmentally disastrous”.
Snowcap proposes that rather than accept the bid from Cannon-Brookes (which it agrees undervalues the company), AGL should instead abandon the demerger and accelerate AGL’s coal exit itself.
AGL shares mired in drama
But are Cannon-Brookes and Brookfield finished with AGL after their offer was rejected?
Well, that remains to be seen. But there seems to be a consensus among many interested parties that they will need to step up their enthusiasm. According to a recent report in The Australian, one of AGL’s top shareholders in VanEck is one of them.
The report reveals that VanEck, an ETF provider and major AGL shareholder, reckons that Cannon-Brookes and Brookfield will need to up their $8 billion bid to convince shareholders to take it on. Here’s some of what VanEck Australia’s deputy head of investments and capital markets, Jamie Hannah, had to say:
It‘s just not a good enough price… What it comes down to is $7.50 doesn’t take into account the long-term benefits of AGL. It’s certainly had a terrible five-year share performance, I won’t argue that. However, it’s just trying a very opportunistic price down at $7.50, when it is at such a low…
They’ll definitely need to go higher to get engagement for sure… I’m not going to give a level but they definitely need to make it attractive for current shareholders to be willing to sell.
Although Hannah wasn’t keen to put a dollar figure on a new offer, AGL’s management itself has. In another article in The Australian last month, AGL chief executibe Graeme Hunt told the paper the following:
Typically, for a change of control of a company, shareholders are looking for a premium 30-40 plus per cent over whatever the appropriate share trading range is for the company.
That would equate to another $1 billion or so.
So unless Cannon-Brookes and Brookfield want to walk away from AGL, it looks like they have some more work to do. Not to mention some more cash to put on the table. Perhaps a billion? We await their next move.
The post Will Mike Cannon-Brookes bring an extra $1 billion to the table in his AGL takeover bid? appeared first on The Motley Fool Australia.
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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 Bruce Jackson.
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