Grok welcomes AGL demerger backdown, warns against asset sale

Mike Cannon-Brookes’ investment vehicle, Grok Ventures, has welcomed the capitulation of the proposed demerger of AGL Energy, after assembling sufficient shareholder opposition to block the plan.

Cannon-Brookes had launched a high-profile campaign against the demerger after the AGL board rejected an earlier takeover offer, arguing that splitting up the company would undermine the its transition away from fossil fuels and destroy the value of AGL’s vertically-integrated business model.

Through Grok Ventures, Cannon-Brookes acquired an 11.3 per cent stake in AGL Energy – making him the company’s single largest shareholder. The Atlassian co-founder pledged to use to vote against the demerger, while also successfully courting support from major institutional investors, like superannuation fund Hesta.

“Grok Ventures welcomes the sensible decision by AGL to abandon its value destructive demerger plan and renew its board,” a spokesperson for Grok Ventures said in a statement on Monday.

“AGL’s retail and institutional shareholders have sent an emphatic message to the Board and management of AGL that the company needs to be kept together to take advantage of the economic opportunity presented by decarbonisation.”

Earlier on Monday, AGL Energy said in a statement to the ASX that it would withdraw its demerger proposal, conceding that it lacked the support of 75 per cent of shareholders – the level necessary to allow the plan to succeed.

It suggests that Cannon-Brookes had secured the support of a significant number of both individual and institutional shareholders to vote against the split.

In the wake of the failed demerger, AGL announced that CEO Graeme Hunt and the chair of the company’s board, Peter Botten, would both be standing aside. Two other board members, Jacqueline Hey and Diane Smith-Gander, will also vacate their positions.

AGL – which ranks as one of Australia’s largest energy companies and Australia’s single largest greenhouse gas emitter – said it would commence a review of the company’s strategic direction to be overseen by board members Graham Cockroft and Vanessa Sullivan, who will retain their positions.

The Grok Ventures spokesperson said the group had “strong views” about AGL’s potential future direction and would seek to be involved in the review, including providing input into how the company can cut its emissions footprint in line with the Paris Agreement goals and offer new products to its customers.

“As AGL’s largest shareholder, we have requested a meeting with Vanessa Sullivan and Graham Cockroft who are co-chairing the “strategic review”,” Grok said.

“Grok has strong views about the future direction of the company – including a Paris-aligned plan, taking advantage of the electrification transition and the renewable generation opportunity,” the spokesperson said.

“We will be seeking assurance from the co-chairs that the “strategic review” is not code for selling off AGL’s assets piece by piece. Our position is steadfast that AGL needs to be kept together as an integrated company.”

“We believe that is in the best interests of shareholders, customers, Australian taxpayers and the planet.”

Grok Ventures reiterated its demand for seats on the AGL board, with Cannon-Brookes revealing over the weekend that he wanted the opportunity to choose at least two appointments to the board.

“Grok will be seeking board representation. We want to ensure that AGL has the talent, capital, capability and oversight that is required to embrace the opportunity presented by decarbonisation.”

Read more: Cannon-Brookes has achieved a stunning victory at AGL: Now for the hard part