AGL’s chief executive Graeme Hunt says shareholders will realise better value by sticking with the existing plan to split the company into two parts through a demerger into an energy retailer and a wholesale coal-generation provider.

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The AGL board has clearly canvassed the views of its larger shareholders and understands it has the numbers to reject the Cannon-Brookes/Brookfield offer, which, in turn, has made it abundantly clear it won’t be putting a higher offer on the table.

In a perfect shareholder world, Cannon-Brookes/Brookfield would have ponied up with a price that was sufficiently generous to allow investors to cash in their shares.

And there will certainly be some AGL investors who would have preferred the company engaged more fully with Cannon-Brookes and Brookfield.

But given the $10 billion to $20 billion that was needed to transition AGL’s generation assets, a decent amount of regulatory risk and threats from the government to torpedo plans to close down the coal power stations early, the consortium had a lot to factor into its proposed price.

Brookfield and Cannon-Brookes are in business to make money.

AGL has not made a compelling case that the demerger will be a winner for shareholder value. It has only made the case that Cannon-Brookes’ offer isn’t enough.

In general, companies undertake demergers based on the theory that the sum of the parts will be more valuable than the whole.

In AGL’s case the demerger detractors believe there are financial and operational advantages to having an integrated energy company - ie a business that has wholesale and retail operations. They also argue that putting the coal generation assets into a standalone company will leave it vulnerable to being uninvestable by the growing number of super and pension funds with an increasing aversion to heavy emitters.

There remains a decent level of reservation from investors about the merits of a demerger which will be the subject of a shareholder vote in June.

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AGL has been a particularly poor share price performer - in the past five years its price has fallen more than 70 per cent. It has experienced a recent reprieve as wholesale electricity prices have staged a partial recovery over the past six months.

But AGL still faces the longer-term reality that wholesale energy prices will continue to be under pressure from the flood of cheap renewables coming onto the market.

It is hard to stack up the economics of closing the last of the coal-fired power stations in 2045 and this explains why others such as Origin are weighing up the feasibility of closing their coal plants earlier than scheduled.

It is not a given that AGL shareholders will swing with the board on the demerger. But that doesn’t represent a vote in favour of the Cannon-Brookes/Brookfield bid.

In June shareholders could find themselves left with a third option - status quo.

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