Australia's AGL Energy Rejects $3.5 Billion Offer, Backs Decision To Split

Australian power producer AGL Energy Ltd on Monday rejected a $3.54 billion takeover offer from billionaire Mike Cannon-Brookes and Canada's Brookfield Asset Management in favour of its plan of splitting in two this year.

AGL said the A$7.50 apiece proposal from Cannon-Brookes, Australia's second-richest man and co-founder of software firm Atlassian, and the Canadian buyout group was a 4.7% premium to the stock's Friday close and undervalued it.

"The proposal does not offer an adequate premium for a change of control and is not in the best interests of AGL Energy shareholders," AGL Chairman Peter Botten said.

The unsolicited cash proposal with an option for AGL shareholders to elect a scrip alternative also provided limited other information about how the deal would be structured, Botten said.

Cannon-Brookes' investment vehicle, Grok Ventures, and Brookfield did not immediately respond to a request for comment.

The profits and value of AGL, Australia's biggest polluter, have shrunk on government pressure to cut retail rates, waning investor appetite for coal-fired power and an influx of solar and wind energy into the grid.

The Australian Financial Review had reported on Sunday that the parties made a joint bid for AGL which included plans to halt its proposed split into a bulk power generator and a carbon-neutral energy retailer.

AGL plans to re-brand as Accel Energy and hold the company's coal-fired power plants and wind farm contracts. It would spin off AGL Australia Ltd, the country's biggest retailer of electricity and gas, into a separately listed company.

AGL said earlier this month it had made significant progress in its demerger plans and repeated on Monday that the split was on track to be completed by June.

"The board is confident that the demerger will create a strong future for both parts of the business," Botten said.

($1 = 1.3961 Australian dollars)