Nigerian Oil Company Battles Over Board With Top Shareholder
On Friday, the shareholders of the London-listed Nigerian oil company Lekoil will vote on an investor’s offer to appoint three members to the company’s board, resulting in a bitter dispute between its founder and its largest shareholder.
The fight also drew in the Ministry of Petroleum of Nigeria, and is more unnecessary public chaos for a company that was caught out by a loan that turned out to be fraudulent last year.
Last March, Metallon, a private investment firm that owns four Zimbabwean gold mines, became a shareholder of Lekoil and now has a 15.1% stake, making it the largest investor.
It is asking shareholders to appoint three additional members to Lekoil’s four-member board, saying the move would improve corporate governance and increase scrutiny of Lekoil’s finances.
“We believe Lekoil’s assets, specifically Otakikpo, are being substantially undervalued by the market and that the value of these assets could be realised if the proposed changes are made to the Lekoil board,” Metallon said in a letter to shareholders, published on Metallon’s website on Dec. 11.
“The moment they have control of the board… and they appoint the chairman, they are in a very strong position to make a takeover attempt,” Akinyanmi told Reuters.
Lekoil founder and chief executive Lekan Akinyanmi is fighting the change, and questioned Metallon’s true aim.
A Dec. 30 letter from the Minister of Petroleum Resources of Nigeria, Timipre Sylva, to Lekoil warns that he should have been notified of the build-up of Metallon’s stake and that there could be consequences for not reporting on “such significant change of shareholding.”
Ministry spokesman Garba Deen Muhammad confirmed the letter and stated that the acquisition or transfer of ownership transactions requires ministerial approval under Nigerian law.
A year ago, after claiming that a $184 million loan it had announced from the Qatar Investment Authority was a “complex facade” by individuals pretending to represent the authority, Lekoil’s share price plummeted.
Metallon, which was looking to diversify beyond gold, was drawn by the low share price and weak oil prices, Chief Executive Thomas Richardson said on wednesday, in a phone interview Reuters . Last March, it started buying shares.
Metallon, however, later faced problems, including high general and administrative expenses (GA) and a loan to Akinyanmi of $1.9 million.
“We are very concerned tha there is simply a lack of desire by certain directors to have a board with proper governance structures and oversight of management,” Metallon said in its Dec. 11 letter to Lekoil shareholders
Nikolas Stefanou, analyst at Renaissance Capital, said that Lekoil’s GA investment, which was $21.4 million in 2019, was strong relative to its asset base. He said other “red flags” included the resignation in the past two months of Lekoil’s nominated advisor and one of its brokers.
“There are some very serious governance issues that need to be addressed,” Stefanou said.
Akinyanmi said, given expensive efforts to develop another oil field, OPL 310, which he said was a valuable asset worth developing, the GA was acceptable.
At 1000 GMT, the virtual shareholders’ meeting will take place.