Progress on Alinta AGL deal

Alinta Ltd's hopes of acquiring Sydney-based The Australian Gas Light Company have taken a small but notable step forward after the two companies finalised a confidentiality agreement.

Completion of the agreement will allow the two companies to pursue in-depth discussions about Alinta's $12 billion proposal to merge with AGL via an agreed scheme of arrangement.

Alinta has previously been frustrated by AGL's apparent reluctance to pursue negotiations with Alinta, which originally announced its merger plan on 21 February.

Alinta tried to progress the merger discussions by releasing a summary of its proposal on 3 March, but was greeted with a cautious response.

AGL said at the time it would continue to recommend its planned demerger "unless an alternative proposal is received that is clearly more beneficial to AGL shareholders".

A key date for AGL is 27 March, when its shareholders are due to vote on the demerger, which would involve splitting AGL's energy and infrastructure assets into two separate companies.

In a statement issued today, AGL chairman Mark Johnson said the confidentiality agreement would allow Alinta to provide more detailed information regarding its proposal, specifically enabling it to provide answers to questions raised in recent days by AGL.

AGL said the information was expected to be received shortly.

"The board is conducting a thorough review of the benefits of the Alinta proposal before making a recommendation to AGL shareholders," Mr Johnson said.

Irrespective of AGL's recommendation, Alinta is well placed to defeat the planned demerger, which requires 75 per cent shareholder approval.

Alinta currently holds a 19.9 per cent stake and, assuming it votes again the demerger, would need only a small number of other shareholders to take its side for the proposal to be defeated.