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Australia’s AGL Energy has scrapped its plan to demerge its coal-focused generation business and said its CEO and chairman would step down, yielding to billionaire and climate activist Mike Cannon-Brookes and other investors pushing against the breakup.
AGL said on Monday that it would not move ahead with its plan to split into separate generator and retailer arms, saying the move was unlikely to garner the required 75% shareholder support after a high-profile campaign from Cannon-Brookes against it.
AGL added that CEO Graeme Hunt and Chairman Peter Botten will leave once replacements are named, as part of a wider “board and management renewal.” Two other board members, Jacqueline Hey and Diane Smith-Gander, will also retire.
Shares in AGL fell 1.7% Monday to AU$8.72 each, giving Australia’s biggest electricity generator a market value of around AU$5.9 billion ($4.2 billion).
Cannon-Brookes, who earlier this year bought an 11.3% stake in AGL in a bid to foil the demerger, welcomed the decision in a tweet Monday. The activist had deemed the plan “globally irresponsible,” arguing it would have slowed down AGL’s transition away from coal and proposed massive investments in renewables. Australian fund manager Geoff Wilson and philosopher Peter Singer also came out against the split.
Instead of the breakup, AGL has now committed to launching a strategic review aimed at identifying ways to create shareholder value “in an environment where pressure on decarbonization and energy affordability is accelerating.” The company said it would engage with Cannon-Brookes’ vehicle Grok Ventures to discuss a way forward.
However, Cannon-Brookes fears the review could lead to asset sales endangering AGL’s vertically integrated business model.
“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,” a spokesperson for Grok told local media.
Grok also reiterated its demand for board representation after Cannon-Brookes said Friday that he would seek at least two board seats if the demerger collapsed.
Australasian Centre for Corporate Responsibility (ACCR), a research and shareholder advocacy with a history of pressing for changes at AGL, welcomed the news and said the leadership overhaul “was years in the making and well overdue.”
“The proposed strategic review must have at its heart alignment with the Paris Agreement, and with that the accelerated transition out of coal-fired power generation,” said ACCR, adding that AGL needs to bring in new directors with experience in developing clean energy at scale.