Stakebuilding by Crown Ocean
- 3 June 2016 the Board received the first TR-1 Notification of Major Interest in Shares (TR-1 Notification) from Crown Ocean intimating that Crown Ocean held a total interest in Ordinary Shares of 3.51% of the total issued share capital of the Company at the time.
- Further TR-1 Notifications intimating increases in Crown Ocean’s holding of Ordinary Shares were received by the Company in August, September and November 2016. More recently, the Company received further TR-1 Notifications from Crown Ocean during February 2017.
Informal MBO discussions
- In August 2016, having acquired an interest in Ordinary Shares representing approximately 10% of the total issued share capital of the Company (based on its then most recent TR-1 Notification), Crown Ocean made an informal approach to the executive management team of the Company. This informal approach proposed that the current management collaborate with Crown Ocean on a financed management buy-out (MBO) of the Company.
- Although no formal offer for Ordinary Shares was tabled by Crown Ocean it was understood that Crown Ocean’s price expectations for the Company were equivalent to the approximate value of cash only on the Company’s balance sheet, with little or no value attributable to Etinde or Bomono.
- In response Crown Ocean was informed that the Board was not prepared to continue discussions unless Crown Ocean made an approach at a level reflecting a fair value of the Company and capable of recommendation to Shareholders. The Board believes that Crown Ocean’s actions since then are intended to achieve the same end – acquiring the Company at less than fair value – through different means.
The only consistent theme of Crown Ocean’s actions in relation to the Company has been a desire to extract cash from the business without paying a fair value for the Company and with no consideration for the protection and creation of future long term value from its upstream assets
- As announced by the Company on 15 November 2016, Crown Ocean submitted a requisition to the Company to include new resolutions for consideration at the Company’s AGM convened for 14 December 2016. The resolutions Crown Ocean sought to requisition proposed that three existing non-executive Directors be removed as directors of the Company and that three new individuals, none of whom had direct experience in the upstream oil and gas industry, be appointed in their place. The purported requisition of the resolutions by Crown Ocean was defective.
- Crown Ocean was given an opportunity to rectify the defects in the purported requisition and, in response, submitted a further requisition to the Company with the same objective of proposing the resolutions for consideration at the 2016 AGM. The further requisition also contained procedural defects.
- After the second unsuccessful attempt to submit a valid requisition, Crown Ocean was given another opportunity to rectify the defects in the purported requisition but failed to do so, with the result that the resolutions were not put to the 2016 AGM.
- At the 2016 AGM Crown Ocean voted its holding against the eight resolutions proposed (with respect to resolutions 4 and 5 it voted part of its holding for and part against) and as a result prevented the passing of the two special resolutions proposed:
- AGM Resolution 7 (the limited disapplication of statutory pre-emption rights on issues of Ordinary Shares); and
- AGM Resolution 8 (authorising the Directors to buy back Ordinary Shares in the market).
- Excluding Crown Ocean’s votes, both special resolutions would have passed with a substantial majority of votes cast in favour, and in particular as a result of AGM Resolution 8 not being passed, the Company was immediately required to cease its share buyback programme launched in August 2016.
Crown Ocean’s vote against the renewal of the share buyback programme at the 2016 AGM was both inconsistent with its stated objective in the Crown Ocean Statement of returning excess cash to Shareholders and denied Shareholders the opportunity to take advantage of the favourable tax treatment available to many of them in respect of share buyback programmes.
Requisition of General Meeting
Most recently Crown Ocean have requisitioned a General Meeting of shareholders, with the intention to impose drastic changes to your Board.
Read our detailed circular here