The Friday coup that seized control of power giant AGL

For AGL, the plan to place a vote before shareholders to split the company was riddled with risk even before Cannon-Brookes turned up with an 11.2 per cent voting interest a month ago. But when Cannon-Brookes mounted his campaign it got significantly harder. AGL was exposed on three fronts. And if it lost ground on any of them, it would lose.

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At the end of last week AGL’s defences crumbled on one and possibly on all three.

But it wasn’t until Friday evening when a major institutional shareholder, Martin Currie, called AGL’s board to deliver the news that it would be voting against the merger, that it was game over.

This shareholder was among several that had been fence-sitting for weeks – disinclined to vote with the AGL board but, like others, reluctant to be responsible for blowing up the company’s strategic roadmap and with it, the board’s credibility.

Like other institutional shareholders, Martin Currie appeared to be looking for cover – waiting to get a report from the powerful proxy advisors that could at least question the merits of the demerger.

For their part, the major proxy advisors were not yet ready to release their reports and appeared to be having difficulty making an unequivocal recommendation.

AGL was seriously exposed on this front. If any of the three big proxy firms recommended a vote against, this would tip the scales against AGL.

Industry super fund HESTA had already come out last week against the demerger and its boss Debby Blakey is also the president of the Australian Council of Superannuation Funds which holds a strong sway over its members who are big industry funds.

Ownership Matters, one of the largest proxy advisors in Australia, had been struggling with Cannon-Brookes’ use of derivatives and borrowed shares which led to concerns about his commitment to retain his stake and his authority to vote.

But on Friday Cannon-Brookes addressed this issue by publicly announcing his Grok Ventures would seek two seats on the AGL board and had cemented the majority of his stake as a conventional shareholding.

When one looks at the numbers for the past few weeks it was a tough call for AGL. It was hanging by a threat – and that broke on Friday.

Meanwhile, even had AGL managed to secure the support of the big investors they were exposed to a revolt from their retail investors – a group that in any company traditionally sides with the board on most major matters.

The retail shareholders were being heavily polled by both sides. AGL was using New York based shareholder services group Morrow Sodali and Cannon-Brookes’ Grok used another international investor analytics expert, Orient Capital.

As last week progressed Grok thought it was polling ahead two-to-one on the retail vote. Since the federal election had exposed a heavy swing to the Green and Teal votes Cannon-Brookes hoped this would be repeated at AGL. His team’s analysis found that the electoral seats that fell from the major parties to the Greens or Teal candidates contained 8.5 per cent of the AGL share register.

When one looks at the numbers for the past few weeks it was a tough call for AGL. It was hanging by a threat – and that broke on Friday.