SYDNEY — AGL Energy Ltd. scrapped the demergerfollowing opposition from investors including billionaire Mike Cannon-Brookes.
The Australian power company on Monday announced a strategic review by a refreshed board. Chairman Peter Botten and Chief Executive Graeme Hunt will both step down when AGL finds replacements, while two other board members will also leave.
“The board of AGL Energy continues to believe that the demerger proposal offers the best way forward. However, the board believes this path is no longer available,” AGL said in a statement.
AGL needed 75% of shareholders to approve the proposal for it to pass. Mr. Cannon-Brookes owns an 11.28% stake through his Grok Ventures investment fund and had been petitioning shareholders to oppose the move. Australian superannuation fund Hesta said it wouldn’t vote its 0.36% holding in favor of the demerger.
AGL on Monday said it would speak with stakeholders including Grok as part of its review. Mr. Cannon-Brookes, the co-founder of Nasdaq-listed Atlassian Corp. and AGL’s largest shareholder, has said that plans by Australia’s biggest polluter to put its aging coal-fired power plants into a separate business would face multiple risks and be unattractive to investors.
AGL said it will start looking for a replacement to Mr. Hunt immediately. Mr. Hunt will act as CEO and managing director until his replacement is appointed, while Mr. Botten will quit the board upon the appointment of an independent replacement.
Jacqueline Hey resigned as a non-executive director effective May 30 and that Diane Smith-Gander will resign in August following the release of AGL’s 2022 fiscal year results.
In a letter to Mr. Botten last week, Mr. Cannon-Brookes said that Grok was seeking two nominees to the AGL board.
AGL canceled the June vote on the demerger and said its review would give consideration to how the company can create long-term shareholder value in an environment where pressure on decarbonization and energy affordability is accelerating.
It said that would include considering any new approaches from third parties regarding alternative transactions. Mr. Cannon-Brookes assembled his stake in AGL after the company in March rejected an improved takeover proposal from a consortium comprised of Brookfield Asset Management Inc. and Grok.
The consortium planned to close AGL’s coal-fired generating assets 10 years ahead of AGL’s 2045 target and replace them with clean energy and storage. AGL rejected the proposal as too low.
The following month, a unit at AGL’s coal-fired Loy Yang A power station in Victoria state was forced offline by an electrical fault. AGL cut its earnings guidance for the 2022 fiscal year as a result.