Brookfield is still interested in AGL Energy (ASX:AGL)

AGL Energy (ASX: AGL) has to be one of the ASX200 best performers so far in 2022 after going up more than 35% this year versus a 13% decline in the index. This impressive return came after the market spent almost 2 years pounding AGL’s share price all the way from pre-pandemic levels of around $20.00 down to an all-time low of $5.10 in November 2021. We introduced AGL as a buying opportunity in December 2021 when it was trading at less than $6.00.

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Takeover talk drove AGL’s share price 

Market’s major reason for re-rating the ASX’s oldest company was that it believed the company’s coal-fired power plants were outdated and that new technologies now allow for more sustainable energy production practices, a presumption that turned out to be too optimistic when the country started to experience power shortages in the last few months.  

What else helped with AGL’s partial recovery in the last several months is the institutional attraction to its low share price. AGL received two takeover offers from a consortium led by Brookfield Asset Management at $7.50 per share in February 2022 and another offer at $8.25 per share in March 2022 which both were rejected by AGL’s board. 

The market perceived the rejections as a vote of confidence from the company’s directors and the improving sentiment pushed the price higher towards the $9.00 level in April 2022. Since then, AGL has been trading in a range between $8.00 to $9.00. 

Brookfield has not let go of AGL yet! 

Today’s AGL announcement to the market revealed that Brookfield’s interest in the company’s acquisition has not diminished after its failed take-over attempt. It turns out that a Brookfield subsidiary owns 2.56% of AGL’s shares on issue. 

It appears that Brookfield and its subsidiaries are taking advantage of the market weakness to buy shares at prices below their latest takeover offer of $8.25 to perhaps have a louder voice in AGL’s boardroom.  

AGL Energy, Weekly Chart in Semi-log Scale (Source: Metastock)

An attractive opportunity for traders 

Regardless of what Brookfield’s motivation is, the buying pressure is adding to the validity of the support level at $8.00 (the green line on the chart) and it can create trading opportunities to capture swing highs to the top of the range around $9.00 with a stop loss being a confirmed break below $8.00. 

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