AGL Energy has abandoned its plans to demerge its coal-focused generation business and has announced its chief executive Graeme Hunt and chairman Peter Botten will leave the company.
In a statement to the ASX, the company said it had insufficient shareholder support and would now undertake a strategic review of its operations.
Four board members including Mr Botten, Mr Hunt, non-executive directors Jacqueline Hey and Diane-Smith Gander will resign, it said.
Atlassian founder Mike Cannon-Brookes, who is the company’s largest shareholder, had been calling for the demerger to be dumped since he launched an unsuccessful takeover bid earlier this year.
Mr Cannon-Brookes, who is one of Australia’s richest people and holds an 11.28 per cent stake in AGL, has been urging shareholders to reject the demerger, arguing that if AGL offloads its assets it will do nothing to reduce emissions and address climate change.
AGL’s coal- and gas-fired power stations are major sources of greenhouse gas emissions in Australia, accounting for about 8 per cent of the nation’s carbon footprint.
Mr Hunt and many AGL directors who are now also departing the company had argued for months that the demerger would unlock value for shareholders.
But the board lost confidence that its plan to split up AGL’s retail and coal-focused power generation businesses would gain the required 75 per cent approval when it went to a vote on June 15.
Its strategic review will now be overseen by a board sub-committee which will report back to shareholders in September.
“While the board believed the demerger proposal offered the best way forward for AGL Energy and its shareholders, we have made the decision to withdraw it,” Mr Botten said.
AGL ‘succumbed to market pressure’
RBC Capital Markets analyst Gordon Ramsay said AGL “succumbed to market pressure” by suddenly abandoning its demerger proposal only two weeks before the scheme vote.
He said the insufficient support to meet the 75 per cent approval threshold for a scheme of arrangement related to stated opposition from investors, including Cannon-Brookes’s Grok Ventures.
Mr Ramsay said AGL had spent about $160 million to date on the failed demerger proposal, only some of which was useful as there was potential to use some of the assessments that had been developed for AGL and Accel Energy.
He said while Graeme Hunt would continue to act in his role until a new chief executive was appointed, a search was underway and there were already discussions with shareholders, including Mr Cannon-Brookes, about who it may be.
Mr Cannon-Brookes has previously said he would seek two nominees to the board of AGL if he succeeded in blocking the energy giant’s demerger plan.