Independent expert backs AGL Energy split plan as Cannon-Brookes builds pressure

  • Demerger in best interest of shareholders – independent expert
  • AGL shares fall as much as 2.4%
  • Mike Cannon-Brookes had bought 11% stake in AGL on May 2

May 6 (Reuters) – AGL Energy’s (AGL.AX) proposed demerger will be in the best interest of its shareholders, an independent expert said on Friday, as Australia’s biggest carbon emitter urged voting in favour of splitting the company.

Earlier this week, tech billionaire and climate activist Mike Cannon-Brookes, whose A$5.4 billion joint takeover bid was thwarted in March, scooped up an 11% stake in AGL to block the demerger. This has created uncertainty over prospects of the demerger, with some shareholders coming out in opposition.

Advisory firm Grant Samuel & Associates, which was engaged by AGL to prepare an independent expert report, said “the demerger is a positive solution to the challenges facing AGL Energy and has the potential to create long-term value for shareholders.”

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This comes after AGL, earlier in the day, said its directors had unanimously recommended voting in favour of the demerger at its court-approved shareholder meeting on June 15.

“I think the jury’s very much still out on this,” AGL Chairman Peter Botten told Reuters, referring to the outcome of the vote.

AGL is aiming to split itself in two entities by June, as it seeks to turnaround from a 75% slump in its market value over the past five years. Shares of the company were down as much as 2.4% on Friday amid a broader market sell-off.

The proposed demerger would create two separate ASX-listed companies — AGL Australia and Accel Energy — the former retail focussed and the latter dedicated to renewable energy operation and a coal-fired generation business, the expert’s report said.

“There is a clear case that the status quo is sub-optimal and change is required,” the report also said, adding that options of early closure or sale of the company have significant drawbacks.

To go ahead, AGL’s plan requires approval from 75% of the votes cast. With Cannon-Brookes holding 11.28% of the shares, only a further 14% would need to oppose the split in order for the demerger plan to be blocked.

($1 = 1.4079 Australian dollars)

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Reporting by Indranil Sarkar, Savyata Mishra in Bengaluru, Sonali Paul in Melbourne; Editing by Subhranshu Sahu and Uttaresh.V

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