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AGL (ASX:AGL) share price on watch amid improved takeover offer

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The AGL Energy Limited (ASX: AGL) share price will be one to watch on Monday.

This follows the release of a takeover update exactly two weeks after the last.

Why is the AGL share price on watch?

As readers might recall, two weeks ago AGL received a takeover offer from a consortium led by Brookfield Asset Management and Atlassian co-founder Mike Cannon-Brookes’ private investment firm, Grok Ventures.

The parties, collectively known as the Brookfield Consortium, made a non-binding offer of $7.50 per share, which was swiftly rejected by the energy giant.

This morning AGL revealed that the Brookfield Consortium has returned with an improved offer.

According to the release, the consortium has made a revised unsolicited, preliminary, non-binding offer to acquire 100% of the shares in AGL Energy for $8.25 per share by way of a scheme of arrangement. This represents a 10% increase on its previous offer and an 11% premium to the current AGL share price.

However, this is still not enough to tempt the AGL Board. It has just as quickly rejected the new offer on the grounds that it is 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.

Why was it rejected?

AGL’s Chairman, Peter Botten, explained why the Board has rejected this latest offer.

He said: “The Revised Unsolicited Proposal continues to ignore the opportunity that AGL Energy shareholders have through our proposed demerger to realise potential future value. It also ignores the momentum we have recently seen in the business through our solid half year result, strong progress on the demerger, strong interest in our Energy Transition Investment Partnership and the improvements we are seeing in forward wholesale prices.”

“The proposed demerger will be a catalyst for the potential realisation of shareholder value. It will create two industry leading companies with distinct value propositions. It will allow each business to be valued separately and more positively by the market on the basis of their own specific business fundamentals. We have defined distinct dividend policies and capital structures for each company that will support both future growth and appropriate returns to shareholders, as both organisations pursue their commitment to responsibly decarbonise without impacting energy reliability and affordability,” he concludes.

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