Australian listed public business AGL Energy Ltd is engaged in producing and distributing electricity and natural gas for home and commercial usage. The firm was founded in 1837 and is headquartered in Sydney, Australia. AGL is Australia’s biggest energy producer and the country’s top emitter of carbon dioxide. In operation, the firm has a total generating capacity of 10,984 megawatts (MW).
Brookfield Asset Management Inc. and Grok Ventures have submitted an unsolicited, preliminary, non-binding indication of interest in acquiring 100 percent of the shares in AGL Energy for $7.50 per share through a deal, which AGL Energy has rejected.
Based on a change of control analysis, the AGL Energy Board believes that the uninvited proposal received on the morning of Saturday, February 19, 2022, grossly undervalues the firm and is not in the best interests of AGL Energy shareholders.
AGL rallied after rejecting an offer
The company’s stock rallied 10% in today’s trading session when the company declined an acquisition offer by Brookfield Asset Management and Atlassian co-founder Mike Cannon-Brookes.
- AGL values $7.92, gaining more than 10% from the previous closing price. The stock closed at around $7.16 on Friday.
- The current market cap of the company is around 5.21 AUD.
- The average trading volume of the shares is around 4.87 million.
- The second quarter of fiscal 2022 saw a revenue gain of 5%. Their revenue in Q2 was around $2.86 billion.
- Their net income saw a significant increase in Q2. The net income gained more than 124% compared to Q2 2021 to reach $277 million.
- The diluted earnings per share were around $0.43, gaining more than 123% from Q2 2021.
- Their profit margin in Q2 2022 was announced to be 9.71% gaining more than 123% compared to Q2 2021.
Reason for the stock surge
The company’s stock gained due to the offer rejected by the company. They said that the interested party had undervalued the stock of the company. The main points of the deal were:
- The proposal reflects a 4.7 percent premium over AGL Energy’s closing price of $7.16 on February 18, 2022.
- According to AGL Energy’s 1H22 Results, reported on February 10, 2022, the Unsolicited Proposal indicates a $4.2% premium above VWAP.
- Compared to the one-month VWAP of $7.19, the Unsolicited Proposal has a 4.3 percent premium.
AGL Energy Chairman Peter Botten Remarks
According to Peter Botten, chairman of AGL Energy, appropriate compensation for a change of ownership is not offered by the plan. Under the Unsolicited Proposal, the Board thinks that AGL Energy shareholders would miss out on the chance to realize possible future value via AGL Energy’s proposed demerger as both proposed organizations take strong action on carbon reduction.
Next Plans
After announcing its intention to proceed with the planned demerger of AGL Energy into two distinct publicly traded companies (AGL Australia and Accel Energy), the Board of directors of AGL Energy has said that they remain dedicated to this goal. In its view, the proposed demerger would provide AGL Energy shareholders with more value than this proposed transaction.
2022 Outlook
As a result of the company’s strong first-half results, AGL Energy has lowered its underlying earnings projection ranges for FY22. Before the announcement, the company’s underlying EBITDA was estimated to be in the field of $1,200 million to $1,400 million. Between $260 and $340 million in underlying net profit after tax is predicted, compared to the earlier estimate of $220 and $340 million.
Conclusion
AGL has rejected the offer due to several reasons. Additional conditions and assumptions apply to the Unrequested Proposal, including completing thorough research and the approval of the ACCC and Foreign Investment Review Board (FIRB). Also, the offer undervalued the company, due to which the company has declined the offer by Atlassian co-founder billionaire Mike Cannon-Brookes.
