AGL says Brookfield has quietly upped shareholding, reviving takeover speculation

A potential takeover of AGL Energy could still be on the cards, after AGL revealed that Canadian investment firm Brookfield appears to have quietly upped its stake in the Australian energy company.

In a statement to the ASX on Thursday, AGL Energy says it believes Brookfield has purchased more than 17.2 million AGL shares in recent weeks, accumulating a 2.56 per cent stake in the company.

The shares were purchased by a cryptically named company ‘Australian 123456789 4 Pty Limited’ and AGL says company records link the entity to Brookfield.

ASIC documents lodged for the company show Brookfield Asset Management Inc. as the ultimate holding company, and the entity’s address is listed as Brookfield Place in Sydney. The entity’s directors are also listed as including Brookfield partners Stewart Upson and Leonard Cherskey.

AGL says it became aware of the interest held by the apparent Brookfield subsidiary through a routine review of its share registry, and it does not yet know whether Brookfield’s stake has since changed.

“AGL became aware of this information through routine registry analysis responses, and therefore the information is historical. It is possible that subsequent trading may have altered the position,” AGL said in a statement to the ASX.

Brookfield has previously partnered with Australian tech billionaire Mike Cannon-Brookes in an attempt to acquire AGL Energy, as part of a bid to halt a planned split of AGL, although there is no indication the two companies have teamed up again.

AGL added that it has received no further approaches from Brookfield after the AGL board rejected the proposed takeover bid led by Cannon-Brookes.

“AGL has not received any updated acquisition proposal from Brookfield, since the two proposals received earlier this year that were announced to the market. AGL is continuing to focus on the previously announced review of AGL’s strategic direction.”

AGL management had sought support for a proposed demerger of the company – carving out the bulk of its fossil fuel assets into a separate company, leaving the core AGL brand with its energy retail business and the remainder of its renewable energy assets.

The proposal was pitched as a way for AGL to transition to a ‘carbon neutral’ energy business, shielding its brand from the deterioration of its coal generation business. However, the plan was met by stiff opposition from a push led by Cannon-Brookes, who said it would undermine both the effective decarbonisation of the energy system and destroy much of the value of the AGL business.

The takeover by Cannon-Brookes led consortium was ultimately blocked by the AGL board, which had argued that the $8 billion offer did not offer shareholders fair value.

However, Cannon-Brookes successfully used his shareholding power – along with that of other supporters – to force the management to back out of the demerger proposal.

The acquisition of the additional 2.56 per cent shareholding by Brookfield suggests the investment giant has maintained an interest in a potential acquisition of AGL, an interest that has been perhaps renewed after the demerger proposal collapsed.

AGL’s management is undergoing a considerable clearing out, with much of the company’s senior positions set to be vacated over the next few months. This includes CEO Graeme Hunt, board chair Peter Botten and Chief Customer Officer Christine Corbett, as well as several additional members of the AGL board.

Cannon-Brookes has maintained a 11.28 per cent stake in AGL, and the management transition is expected to allow the Atlassian co-founder to select multiple appointments to AGL’s board.