2nd Jan 2014 12:59
LONDON (Alliance News) - Urals Energy PLC Thursday urged shareholders to vote against takeover resolutions to be discussed at an extraordinary general meeting set for January 27.
The Russia-focused energy company, which has struggled with infighting and alleged unpaid debts during this possible takeover period, said the plans of the remaining bidder, Fire East Corporation, which has an 18.19% holding in Urals, will damage the company if it succeeds.
The company said Fire East does not have a viable strategy for Ural Energy's development, and it will undermine efforts of recent years by the company to clear out struggling legacy assets.
Urals Energy said Fire East has plans to acquire what it called a high-risk asset on Sakhalin Island in the far-east of Russia. The plan has both geological and financial risks for Urals Energy, the company claimed, adding there is a real danger that shareholders will have their interests in Urals Energy significantly diluted if the resolutions are passed.
The company said that a visit by the police earlier in December, which led to the removal of certain files from its offices in Moscow, may have been an attempt to intimidate the board into acting against the best interests of shareholders, citing possible connections between the police visit and both a loan due from a former director of Urals Energy, Vyacheslav Rovneiko, and an alleged debt repayment agreement made by the company.
Urals Energy said the alleged agreement, which it received by facsimile in October 2013, implied that Urals entered into a debt repayment deal in December 2010 with a Cyprus-based company named UEN Cyprus Ltd which would make Urals Energy liable to pay USD41.7 million in December 2013.
Urals Energy said that the alleged agreement was passed to the company's chairman via a Moscow-based investment banker who said he was acting on behalf of Maxim Barsky, a board member of Fire East, and Dmitry Bosov, a major Russian businessman who Urals argue is connected to the takeover group.
Urals said the investment banker stated in October that his representatives would publicise the existence of the alleged agreement unless the directors of Urals, with the exception of one member, stood down immediately.
Following an investigation by non-executive directors, Urals Energy said in October it has no reason to believe the agreement with UEN Cyprus was genuine and therefore did not believe that the company is bound by the terms. The firm also said it had no record of the transaction and that due to inconsistencies in the document, the board concluded that the alleged agreement is a forgery and an attempt by a third party to defraud Urals.
The company noted that the due date for the alleged repayment agreement was December 15, but no demand for payment was received.
UEN Cyprus is owned by Rovneiko, who was ordered in 2012 to pay the company USD3.7 million by arbitration proceedings in London to recover a separate loan agreement.
Urals said it is yet to receive the cash it is owed by Rovneiko, but it has managed to auction off personal belongings of Rovnieko's, found in his registered home in Belgium. Also, in both Russia and Cyprus there are court orders for the seizure of all of Rovnieko's assets.
Urals said that if allowed to vote, Rovneiko would vote for the proposals, and the new board may waive the repayment owed to the company by Rovneiko.
In September, Urals Energy's two biggest shareholders, Fire East and Alpcot Capital Management Ltd, launched an attempt to remove all but one of the company's board because they think the company is underperforming.
The company noted that Alpcot Capital Management since has sold all of its shareholding in the company and that Torbjorn Ranta, the representative of Alpcot on the company's board, has resigned.
The Alpcot shares were bought by Adler Impex S.A. which is now the beneficial owner of 25.08% of the company and, according to Urals, is ?fully supportive? of the existing management team.
Earlier in the month, one separate interested party pulled out of talks regarding the company's takeover after the police visit and alleged debt repayment notices made the acquisition opportunity less desirable.
Urals has urged shareholders to reject all the motions by Fire East and former holder Alpcot who called for the upcoming extraordinary general meeting.
Urals Energy shares were up 14% to 6.00 pence, putting them in the top ten AIM movers Thursday.
By Tom McIvor; [email protected]; @TomMcIvor1
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