London-listed Nigerian oil company Lekoil’s shareholders will vote on Friday on an investor’s bid to add three members to the company’s board, in the culmination of a bitter dispute between its founder and its biggest shareholder.
The dispute even drew in Nigeria’s Ministry of Petroleum, and is more unwanted public turmoil for a company that last year was caught out by a loan that turned out to be fraudulent.
Metallon, a private investment company that owns four gold mines in Zimbabwe, became a shareholder of Lekoil last March and now has a 15.1% stake, making it the top 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.
Lekoil founder and chief executive Lekan Akinyanmi is fighting the change, and questioned Metallon’s true aim.
“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.
Complicating matters is a December 30 letter from Nigeria’s Minister of Petroleum Resources, Timipre Sylva, to Lekoil warning that he should have been informed of the build-up of Metallon’s stake and that there could be consequences for not notifying about “such significant change of shareholding.”
Ministry spokesman Garba Deen Muhammad confirmed the letter and said that under Nigerian law, ministerial consent is required for acquisition or transfer of ownership transactions.
A year ago, Lekoil’s share price plunged after it said that a $184 million loan it had announced from the Qatar Investment Authority was a “complex facade” by individuals pretending to represent the authority.
The low share price and weak oil prices attracted Metallon, which was looking to diversify beyond gold, Chief Executive Thomas Richardson told Reuters in a phone interview on Wednesday. It began purchasing shares last March.
But Metallon later encountered concerns, including high general and administrative expenses (GA) and a $1.9 million loan to Akinyanmi.
“We are very concerned that… 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.
Renaissance Capital analyst Nikolas Stefanou said Lekoil’s GA spending, which was $21.4 million in 2019, was high compared with its asset base. He said other “red flags” included the resignation of Lekoil’s nominated adviser and one of its brokers in the past two months.
“There are some very serious governance issues that need to be addressed,” Stefanou said.
Akinyanmi said the GA was appropriate given costly efforts to develop another oil field, OPL 310, which he said was a valuable asset worth developing.