Shashwat Awasthi & Harish Sridharan

(Reuters) -Australia’s power producer AGL Energy (OTC) Ltd rejected Monday’s $3.54 billion offer by Mike Cannon-Brookes, a billionaire from Canada and Brookfield Asset Management to acquire it. Instead, the company plans to split in two.

AGL stated that the proposal of Cannon-Brookes for A$7.50 per piece from Australia’s second richest man, and co-founder at software company Atlassian (NASDAQ;), was 4.7% higher than the stock’s Friday closing price and underestimated it.

Peter Botten, AGL chairman stated that the proposal did not provide an adequate premium to allow for change in control. This is against AGL Energy shareholder’s best interest.

Botten indicated that an unsolicited cash proposition with the option to AGL shareholders for scrip alternatives also contained limited information regarding how the deal would be structured.

Cannon-Brookes owns Grok Ventures which is an investment vehicle. Brookfield didn’t immediately reply to our request for comment.

AGL is Australia’s largest polluter and its profits have declined due to government pressures to reduce retail rates. Investor appetite for coal-fired energy has waned and there has been an increase in solar and wind power into the grid.

According to the Australian Financial Review, Sunday’s report by AGL revealed that both sides had made a joint bid. This included plans to stop AGL’s proposed splitting into a bulk energy generator and an carbon-neutral retailer.

AGL intends to change its name to Accel Energy, and retain the coal-fired power plant contracts and wind farms. AGL Australia Ltd., which is the nation’s largest supplier of electricity and natural gas, would be relisted.

AGL had earlier stated this month that significant progress was being made in demerger planning and reiterated Monday that the split would be completed by June.

Botten stated that “the board is confident in the demerger’s ability to create a strong future” for the two parts of the company.

($1 = 1.3961 Australian dollars)