Australian power company AGL Energy Ltd. (AGLNF) has rejected an unsolicited $3.54 billion takeover bid from a consortium that includes Canada-based Brookfield Asset Management and Australian billionaire Mike Cannon-Brookes, Reuters reported.
The bid comes as AGL is looking to split itself into a coal-fired generation business and a retail and renewable energy business by June. The move is aimed at reversing a 75% decline in the company’s market value during the last five years.
Brookfield and Cannon-Brookes offered to pay A$7.50 cash for each share of AGL but the power firm said the deal undervalued the business. The price represents a 4.7% premium to the AGLNF stock’s closing price on Friday.
AGL Chairman Peter Botten said, “The proposal does not offer an adequate premium for a change of control and is not in the best interests of AGL Energy shareholders.”
The company’s spin-off will help build a “strong future” for both the units, Botten added.
Meanwhile, Cannon-Brookes and Brookfield said they aim to accelerate the delivery of cheap and clean energy with this acquisition. They intend to replace AGL’s coal-fired power with clean energy and storage by investing around A$20 billion. This will help the company in reaching its target of net-zero carbon emissions by 2035, five years ahead of the original plan.
Brookfield’s Asia Pacific CEO Stewart Upson said that the consortium plans to convince the Board of AGL to open its books to the consortium.
Analysts believe that this approach will trigger a bidding war for AGL as several European energy firms, including France’s TotalEnergies (NYSE: TTE), Spain’s Iberdrola (IBDRY) and the Netherlands’ Shell (NYSE: SHEL), are seeking a part of Australia’s power retail sector.
Headquartered in New South Wales, AGL is engaged in the generation and retail of electricity and gas for residential and commercial use. With an operating power generation capacity of 10,984 MW, it generates energy using thermal power, natural gas, wind power, hydroelectricity, solar energy, gas storage, and coal seam gas sources.
Wall Street’s Take
Recently, Credit Suisse (NYSE: CS) analyst Peter Wilson maintained a Buy rating on the stock and lowered the price target to $5.9 (9.2% upside potential).
Additionally, Tom Allen of UBS (NYSE: UBS) reiterated a Hold rating on AGL and raised the price target to $5.08 (6.1% downside potential).
Overall, the stock has a Hold consensus rating based on 1 Buy, 1 Hold and 1 Sell. The average AGL Energy price target of $5.38 implies 0.5% downside potential. Shares have lost 34.2% over the past year.
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