Atlassian co-founder Mike Cannon-Brookes’ plans for AGL Energy queried by investors

He says an integrated structure is needed at AGL to support the construction of more low-cost renewable generation and allow for a quicker exit from coal power, but has not detailed his plans, saying the focus needs to be on first voting down the demerger. He launched a campaign, ‘Keep it together Australia’, to block the split.

Mr Cannon-Brookes earlier $5.5 billion takeover approach for AGL, which was rejected by the board, is also fueling uncertainty about his ultimate intentions, amid overall concerns about the stability of the company if the demerger fails to reach the required 75 per cent approval from shareholders.

“A failed vote would likely destabilize the business, potentially leaving management in an untenable position and opening the company up to be acquired (something Mr Cannon-Brookes attempted [in March-April]),” JPMorgan’s Mr Busuttil said.

One small shareholder also voiced skepticism about Mr Cannon-Brookes’ real motives for taking the stake and pursuing a quicker exit from coal power at AGL: “I can only think he is out to make more money rather than achieve a real climate benefit,” the shareholder said.

Meanwhile, questions are also being asked of the board’s “plan B” for AGL, with the demerger being presented to shareholders as the only option to handle the rapidly decarbonising electricity supply market.

Some of those questions may be answered in the scheme booklet that will provide details of the restructuring and which is due within days.

“Typically demerger documents include the expected outcome if the shareholders reject the proposal, which might be going back to [the] drawing board while continuing to operate as before – perhaps the independent expert report will shed light on alternatives that have been considered?” the ASA’s Ms Balzer said.

The move by Mr Cannon-Brookes on Monday to secure almost 11.3 per cent voting rights in AGL is intended to ensure the 75 per cent approval level is not reached at the June 15 meeting.

Some analysts say that will almost certainly ensure the vote fails, given by no means will all shareholders vote, increasing the weighting of the voting of Mr Cannon-Brookes and his growing band of supporters that are resolved to vote against.

But others expect the emerger to be approved, including Mr Busuttil.

“While risks have increased, we believe the demerger will likely proceed regardless of the events this week,” he said in a note to clients.

Mr Cannon-Brookes and then-partner Brookfield offered $7.50 per share for AGL in February, but that proposal and a subsequent sweetened offer of $8.25 per share was rejected as wholly inadequate by the AGL board.

Doubts around Mr Cannon-Brookes’ real ownership of the shares he speaks for are also being queried, given they are held partly through complex derivatives trades rather than through a full economic ownership.

That means that he almost certainly has not paid the full $650 million-odd that his interest is worth, while the derivatives help protect his position if the AGL shares fall, as many expect if the vote fails.

“I’m not sure he has a true economic interest that’s not unhedged for that ownership position, it’s not clear he has outlayed that money,” one professional investor said.

“Then you’ve got someone opining the stock who isn’t necessarily in the same position as other shareholders who have a true economic position.”

Ms Balzer said the ASA “would be interested in when [Mr Cannon-Brookes] will own those shares outright”.

AGL shares shed a further 1.3 per cent on Wednesday, to $8.24, leaving them below the latest rejected offer for the company from Brookfield and Mr Cannon-Brookes for the first time for two weeks.

Meanwhile, ethical investor Future Super, which does not invest in AGL, backed Mr Cannon-Brookes’ move to mobilize against the demerger, with chief executive and founder Simon Sheikh voicing expectations of more shareholder activism from individuals and hedge funds using the power of money to target “climate laggards”.

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