Cannon-Brookes takes 11% stake in AGL to stop demerger

Photo of tech billionaire Mike Cannon-Brookes wearing hoodie and standing outside in front of greenery (sun cable)
Grok Ventures' Mike Cannon-Brookes

Australian tech billionaire Mike Cannon-Brookes has gained an 11.28 per cent interest in AGL Energy, a move that follows the company’s rejection of a $3.8 billion takeover offer he made with Brookfield Asset Management.

According to Reuters, the off-market purchase by Cannon-Brookes’ Grok Ventures is aimed at blocking a plan by the country’s biggest power producer and polluter to split into two companies—a plan that Cannon-Brookes called “flawed” in a letter to AGL’s board.

Related article: AGL said no to a $5b takeover bid, but it isn’t over yet

“As a result, we intent to vote every AGL share we control at the relevant time against the demerger, and will actively encourage all AGL shareholders to do the same,” he said in a statement.

The 11.28 per cent stake is estimated to be worth $654 million.

Cannon-Brookes told the AGL board that the demerger would “entrench a position that is inconsistent with limiting climate change” and urged the board to disclose his letter to the Australian stock exchange so other shareholders would be aware of his intention to vote against the demerger.

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

AGL said its board was committed to delivering on the proposed demerger which will be put to a shareholder vote in June. The company intends to split into an energy retailer, called AGL Australia, and a coal-fired power generation company, called Accel Energy.

“The AGL Energy demerger is on track to be completed by the end of next month,” it said in a statement ahead of receiving Cannon-Brookes’ letter.

In his statement, Cannon-Brookes said AGL Australia and Accel would “emerge as two weaker, interdependent entities that are more costly to run” and said he expects their total value would be worth less than AGL’s current value.

Related article: AGL to acquire biogas business Energy360

Earlier this year, Grok with Canada’s Brookfield Asset Management jointly bid for AGL, aiming to shut down its coal-fired power plants several years ahead of their scheduled closure.

AGL’s shares have jumped 20 per cent since February 18—the last trading day before AGL announced it had rejected the takeover offer. The offer was later sweetened but was also rebuffed.

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