28th Jan 2016 11:10
LONDON (Alliance News) - The ongoing battle at JKX Oil & Gas PLC took a late and final twist on Thursday morning, only hours ahead of a landmark shareholder meeting that will decide the future of the business following a lengthy debate over the management of the company.
JKX Oil is holding a extraordinary general meeting later Thursday which will see shareholders vote on a series of proposals put forward by one of its largest shareholders, Proxima Capital Group, which is trying to oust the majority of JKX's management to take the company in a new direction.
JKX and Proxima have been locked in battle for some time, with Proxima determined to shuffle the management after claiming the company has consistently underperformed and had poor corporate governance.
Under the proposals, Proxima is trying to remove seven out of nine JKX board members and replace them with five individuals that it has nominated itself.
However, with only hours before the meeting is due to be held, JKX Oil was hit by a couple of blows after releasing news that some of those directors have chosen to resign rather than await their fate.
The result of the meeting will also not be as clear cut as originally thought, potentially leaving the future of JKX in the balance whilst it awaits a ruling from a legal battle with its other significant shareholder.
Out of JKX's nine board members, Proxima is hoping shareholders will vote later Thursday to remove all but two of the company's non-executive directors. However, JKX Oil Thursday said Finance Director Cynthia Dubin and Non-Executive Dipesh Shah have decided to resign before the meeting rather than wait for the shareholder vote.
That means the resolutions to remove those two board members have been removed, leaving shareholders to vote on whether to remove Chairman Nigel Moore, Chief Executive Paul Davies, Commercial Director Peter Dixon, Technical Director Michael Miller, and Non-Executive Director Lord Oxford.
The company's other two Non-Executive Directors, Richard Murray and Alastair Ferguson, are set to stay with JKX regardless of the outcome.
However, in another blow, JKX Oil said it may have to count votes from its other substantial shareholder, Eclairs Group Ltd, after the company tried to block Eclairs from being able to vote at the EGM Thursday.
Eclairs has also previously tried to oust the management at the company, and plans to vote in favour of Proxima's proposals to revamp the board. Eclairs is the largest shareholder in JKX with a 27% stake whilst Proxima is the second largest with a stake of around 20%.
Those stakes combined come to around 47%.
JKX Oil issued notices to Eclairs and another shareholder, Glengary Overseas Ltd, earlier this month that restricted each of them from voting at meetings held by the company in the hope that the substantial shareholder would not be able to participate in the EGM Thursday.
However, Eclairs and Glengary are fighting the claims and have submitted claims to the English court that the voting restrictions imposed by JKX are not effective.
Importantly, a court hearing on the matter will not take place until February 8, meaning nobody will know whether Eclairs' and Glengary's votes at the EGM Thursday will be valid until next month.
That means JKX Oil will have to allow both parties to vote on Proxima's proposals later Thursday, presenting two sets of results - one which will take their votes into account and one that will not take the votes into account - whilst it waits for the court to rule whether those votes are valid or not.
Overall, it means the official result of the meeting will not be known until later in January, unless both sets of results are the same.
Later Thursday, Eclairs Group released a response to the matter, reiterating that it won a similar court battle against JKX recently concerning voting restrictions as far back as 2013.
"We are very disappointed with the JKX board's further confrontational attempts to deny the company's largest shareholders their rights to vote at JKX's forthcoming EGM. In response, yet again, Eclairs has been forced to commence urgent proceedings to protect its rights," said Eclairs Director Michael Bakunenko.
"In the face of these proceedings brought by Eclairs, the company has now given undertakings to the High Court to allow Eclairs to attend the forthcoming EGM and for its votes to be counted with suspensory effect pending further consideration by the High Court of whether the company's latest actions are justified," he added.
Eclairs said it believes Proxima's approach has been "well balanced and transparent," confirming it will vote in favour of its proposals because it "cannot support a board (at JKX) that has overseen years of underperformance."
Importantly, Proxima is not only trying to oust the majority of the JKX board, but replace them with five individuals to join the board alongside the existing Non-Executive Directors Murray and Ferguson - which Proxima wants to retain for continuity purposes.
Proxima has proposed appointing former global chief operating officer of Ernst & Young Paul Ostling as JKX Oil's new chairman, with the aim of bringing board experience on international blue-chip companies in the UK, US and Russia.
Tom Reed, who has over 20 years of experience in the business and energy within Ukraine and Russia, would become JKX Oil's new chief executive under Proxima's proposals, whilst qualified accountant Russell Hoare, who also has 15 years experience working within Ukraine and Russia, would become JKX Oil's new chief financial officer.
Proxima said all three of those candidates are independent of the Proxima. However, the shareholder also proposed appointing two of its own representatives to the board, namely its Chief Executive Vladimir Tatarchuk and its Managing Director Vladimir Rusinov.
JKX Oil has stood its ground during the lengthy battle, and claims Proxima are trying to takeover the company without paying for it and has said that reshuffling and downsizing the board would remove a substantial amount of experience from the board. JKX Oil has also questioned Proxima's plan for the business.
One major backing that JKX Oil managed to secure ahead of the EGM Thursday was the support of Institutional Shareholder Services Inc, a corporate governance and proxy advisory firm that provides shareholders with advice on voting matters. ISS is considered influential, recently for example supporting the proposed mega-merger between Royal Dutch Shell PLC and BG Group PLC.
JKX Oil shares were down 1.7% to 25.80 pence per share on Thursday.
By Joshua Warner; [email protected]; @JoshAlliance
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