“Skin in the game:” Cannon-Brookes spends $600 million cash on AGL

Tech billionaire Mike Cannon-Brookes has declared he has “skin in the game” after executing a series of complex transactions that means his private company has spent $650 million on its blocking stake in AGL, including $600 million in cash.

Grok Ventures, the private investment firm of Cannon-Brookes, confirmed in a statement on Wednesday that his 11.3 per cent stake in AGL is now entirely made up of physical shares.

This followed a series of transactions on Tuesday that saw JP Morgan do some $300 million of deals that converted derivative structures into physical shares.

“Grok has now invested approximately $650 million to build its relevant interest of 11.28% in AGL shares, with close to $600 million funded with cash and the remainder with debt,” it said.

Grok is trying to stop the demerger of AGL in what is turning out to be a landmark battle between the utility’s board and one of Australia’s richest and most pro-environment business people.

Grok used the stake to compare its commitment to the company, compared to that of the AGL board and management.

“Grok would again like to highlight the AGL Board’s lack of skin in the game, with Directors holding less than 0.02% of shares in the company,” a spokesman said.

“Grok implores the AGL Board to start preparing for AGL’s future and the potential outcome that the demerger does not proceed.”

The vote could turn out to be a close call, with both parties lobbying furiously to convince shareholders of the merits of their plans.

Cannon-Brookes wants to shut down the last of the company’s coal units by 2035, and has insisted the company is best placed to do that as a single entity, raising concerns about the viability of the proposed coal spin-off, Accel.

In a letter to shareholders on Tuesday, Cannon-Brookes said the AGL demerger plan was ill-considered, irresponsible, and not consistent with the Paris climate goals.

AGL responded to the latest broadside with its own harsh words, saying Cannon-Brookes had failed to articulate the details of his strategy, and how we would close down the Bayswater and Loy Yang A coal generators, and ensure enough renewables and storage were in place.

AGL accused Cannon-Brookes of indulging in rhetoric with no details.

“We’ve been meeting with a number of investors and shareholders over recent days and they are very concerned that Grok has not articulated a plan beyond scuttling the demerger, and are also concerned that they might not be revealing their plan because of what it could mean for shareholder value,” CEO Graeme Hunt said.

Given the likely fine margins of the shareholder vote on June 15, there will be considerable interest in one 1.21 per cent block of shares held by Cannon-Brookes that is subject to a right of recall by JP Morgan under stock borrow arrangements.

“At this point in time, JPM has not recalled any shares,” the Grok spokesman said.

“Given the success Grok has had in unwinding the collar position and reducing the residual borrow risk, Grok is confident that they will be able to vote the full 11.28% at the relevant time, against the demerger.

“They ask their fellow shareholders to look at the merits of the AGL Board’s proposed demerger and vote against it.”