Here's why AGL shares hit the headlines again on Friday

As billionaire Mike Cannon-Brookes continues his campaign against the proposed demerger, shares in AGL closed higher today.

| More on:
A man and a woman sit in front of a laptop looking fascinated and captivated.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • AGL shares are in the news headlines again today 
  • Mike Cannon-Brookes is continuing in his quest to block the proposed demerger of AGL's energy retail and generation segments
  • The demerger vote will be held on 15 June 

The AGL Energy Limited (ASX: AGL) share price finished the session up 0.58% trading at $8.63 on Friday.

While the ASX utilities company made no official announcements to the ASX today, it was in the news.

Recap on the drama at AGL this year

To recap quickly, Atlassian billionaire Mike Cannon-Brookes and Canadian company, Brookfield tried to buy AGL outright earlier this year. On the day news of the first offer broke, the AGL share price spiked 9%.

The AGL board rejected both the first offer and a second improved offer of $8.25 per share. The board said the price was "still well below both the fair value of the company on a change of control basis and relative to the expected value of the proposed demerger".

The board prefers to proceed with plans for a demerger of AGL's energy retailing and energy generation segments. Cannon-Brookes reckons this is a bad move environmentally and for AGL shareholders.

So, what's Cannon-Brookes doing now?

In short, Cannon-Brookes wants to block the demerger. Earlier this month, he purchased an 11.3% stake in AGL using derivatives. This made him the largest shareholder at AGL.

According to reporting in The Australian, Cannon-Brookes reckons former AGL Energy boss and US businessman Andy Vesey is against the company's proposed demerger.

Cannon-Brookes, who is a passionate environmental advocate, apparently met with Vesy to seek his support in blocking the demerger.

According to the article, Cannon-Brookes said: "He is broadly supportive of what we are trying to do and he does believe very much in the opportunities for these assets to go in a different direction."

When is the demerger vote?

The AGL board needs 75% shareholder approval at the vote on 15 June for the demerger to proceed.

If the demerger fails, Cannon-Brookes would like to see AGL phase out coal by 2035 and provide green loans to customers who want 100% renewable electricity in their homes.

Why does Cannon-Brookes want to keep AGL whole?

According to reporting in the Australian Financial Review (AFR), a memo received by shareholders in Cannon-Brookes' Grok Ventures says he believes an integrated AGL Energy "could capture 30 per cent of the electricity retail market".

The memo said AGL could achieve this "by closing its coal power stations by 2035 and offering customers 100 per cent renewable energy while expanding into energy finance products".

The memo stated that moving to 100% electric could cost the average Australian home approximately $100,000. It said: "We believe converting this capital expenditure into operating expenditure is a challenge AGL can solve for customers."

The AFR also reported that RBC Capital Markets considers the demerger's value to shareholders as "subjective".

The AFR quoted RBC analyst Gordon Ramsay:

In our view, shareholder benefits are opaque. After the demerger, shareholders will continue to own the same underlying assets in the same proportion, implying that the demerger value uplift argument is subjective.

Motley Fool contributor Bronwyn Allen 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 Scott Phillips.

More on Energy Shares

Multiracial happy young people stacking hands outside - University students hugging in college campus - Youth community concept with guys and girls standing together supporting each other.
Energy Shares

Which ASX 200 uranium stock is surging on huge news

Let's see why investors are bidding this stock higher today.

Read more »

Oil rig worker standing with a clipboard.
Economy

What does the changing oil price mean for the ASX 200?

Oil continues to wobble with the tensions seen on the world stage.

Read more »

Australian notes and coins symbolising dividends.
Energy Shares

Tempted by the big dividend yields on ASX energy shares? Here's why you should think again

The income from these stocks might not be as good as it seems.

Read more »

A man looking at his laptop and thinking.
Energy Shares

Up 100% since April, why is this ASX 300 uranium stock plunging today?

The ASX 300 uranium miner has come under heavy selling pressure on Thursday. But why?

Read more »

Excited couple celebrating success while looking at smartphone.
Energy Shares

Paladin Energy share price races higher on big announcement

Let's see why this uranium producer's shares are charging higher today.

Read more »

Oil worker using a smartphone in front of an oil rig.
Share Market News

ASX 200 up strongly while energy shares plummet on ceasefire news

ASX 200 energy shares are tumbling with Karoon Energy and Woodside Energy the biggest fallers.

Read more »

An oil worker assesses productivity at an oil rig as ASX 200 energy shares continue to rise.
Share Market News

ASX 200 energy shares lead for the second week as world awaits US decision on Iran

ASX energy shares lifted 5.31% while the ASX 200 fell 0.49% amid the US President contemplating strikes.

Read more »

Copal miner standing in front of coal.
Energy Shares

What happened to Coronado Global Resources shares on Friday?

The ASX coal miner announced new funding this week.

Read more »