Canadian investment group Brookfield Asset Management and tech billionaire Mike Cannon-Brookes have abandoned their campaign to acquire AGL Energy after their second bid for the Australian company was rejected.
The Brookfield consortium made a non-binding offer to buy the company for A$8.25 a share over the weekend, up from the initial offer of A$7.50 made two weeks ago, people on both sides of the deal said. The new offer valued the company at A$5.43bn.
“The Brookfield-Grok consortium looking to take private and transform AGL is putting our pens down — with great sadness,” Cannon-Brookes wrote on Twitter on Sunday, referring to his private investment firm.
AGL will officially reject the higher offer in an announcement on Monday morning, a person close to the board said, adding this had been communicated to the consortium.
AGL owns three large coal plants, some gas and renewable assets, and one of the country’s biggest energy retail business with more than 4mn customers, according to its 2021 annual report. The company is Australia’s biggest carbon emitter, producing about 8 per cent of the country’s total emissions, according to government figures.
Under the proposed acquisition, Brookfield and Cannon-Brookes planned to hasten the closure of AGL’s three coal-fired power stations and spend A$20bn on renewable generation and storage capacity. The proposal was welcomed by environmentalists because it would have reduced the country’s carbon emissions and accelerated the transition to a low-carbon electricity grid.
AGL’s share price has fallen steadily since 2017, as the rapid proliferation of cheap wind and solar across the country put increasing price pressure on coal-fired power generators.
The group announced last year that it would split, with retail and coal generation businesses operating in two separate divisions.
Brookfield had said the proposed demerger would cause the share price to fall further. But Graeme Hunt, AGL chief executive, said the initial offer was “light years” away from a fair valuation of the company and failed to factor in the benefits of the split.
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AGL would have been likely to engage with the Brookfield consortium if it had offered A$8.50 share, according to one person with knowledge of the matter.
The Brookside consortium had previously said it would target shareholders directly but this was made difficult because AGL has an unusually large number of small retails investors and few large institutional stockholders, according to the company’s share register.
The decision to reject the offer had echoes of Australian casino operator Crown’s attempt to fend off private equity group Blackstone’s attempt to buy it, which was only successful on the fourth bid.