ALG Energy rejects $3.5 Billion offer

The biggest power producer of Australia, ALG Energy Ltd has rejected a $3.54 billion takeover offer from billionaire Mike Cannon-Brookes and Canada's Brookfield Asset Management in favour of a plan to split in two this year.

ALG Energy said that the proposal from the Canadian group and the billionaire is at a 4.7% premium to the stock's Friday close and undervalued it.  The shares of the company jumped as much as 13% to a high of $8.09, reflecting investors' view that a higher bid will emerge.

Investors see companies like ALG Energy as a tough value with electricity prices highly volatile in the accelerating transition away from coal-fired generation. The investors will need very low capital to make the switch to renewable energy and generate a good return, said Jason Teh. He also said that the transition from coal to renewable is going to be a huge challenge for ALG.

ALG Energy has been hammered over the last few years by sliding power prices, with the influx of solar and wind power making coal-fired plants less economical to run 24 hours a day.