Lekoil Nigeria Limited has filed a petition in the Grand Court of Cayman Island Court to request the just and equitable winding up of Lekoil Cayman to avert value loss by shareholders of the AIM-listed company.
As disclosed by the Chairman of Lekoil Nigeria Limited, Mrs Aisha Muhammed-Oyebode, the petition was filed by Founder and Chief Executive Officer of Lekoil Nigeria Limited, Mr. Olalekan Akinyanmi.
In her letter to shareholders of Lekoil Cayman, Mrs. Oyebode called their attention to the petition presented by Akinyanmi to wind up Lekoil Limited, under which name Lekoil Cayman operates in Nigeria.
She said: “I write to you today to alleviate any concerns that you may have regarding this petition and assure you that that it is not the intention of Mr Akinyanmi nor Lekoil Nigeria to compromise the integrity of your investment in the company.
‘You may recall that I wrote to you in December 2020 following the requisition of an extraordinary general meeting by Metallon Corporation. In my letter I foreshadowed the efforts to take over your company by the back door by Metallon Corporation and various other activist institutional shareholders, without making a formal offer for your shares as required by the Company’s articles of association, and without offering fair value for your company’.
The Chairperson of Lekoil Nigeria Limited added that recent events had proved her predictions correct. According to her, the Board of Directors of the company had entered into agreements with Savannah Energy Investments Limited (Savannah), a wholly owned subsidiary of Savannah PLC. This, she further said, was in an attempt to hand over control of the entire assets of the company, which ‘have effectively been handed over to Savannah for £855,000 funding under a convertible funding agreement and US$1,000,000 funding under an option agreement’.
Muhammed-Oyebode further said: ‘We believe the assets of the company are conservatively worth in excess of US$500 million, with the producing asset of the company’s Otakikpo asset alone is conservatively valued at US$200 million’.
Explaining further, Muhammed-Oyebode said that ‘in the absence of any substantial operations, the funding raised from Savannah will be applied to pay the fees of the Directors and other Advisers such as SP Angel and Tennyson Securities. Shareholders are unlikely to receive a penny of the funds raised by the company, nor will they be invested in the underlying assets of the company. The Board further announced on 1st April 2022, the fees to be paid to the Directors of the company for the current year (amounting to approximately US$290,000) and an intention to further dilute your shareholding (potentially by a further 20%, following on from the approximate 40% dilution that you have already suffered this year) through the issuance of shares pursuant to a contractor services arrangement’.
Lekoil Nigeria Limited, according to her, had only ever sought to protect the interest of shareholders and create long term value for shareholders, adding that the company had committed to developing its assets and increasing production from its producing asset, Otakikpo.
Last December, Lekoil Nigeria announced a cash offer to acquire shares of shareholders wishing to exit their investment at 1.9p (Great Britain Pence) and a share exchange offer for those shareholders wishing to continue in their investment in the Lekoil group. The Board however took steps to ensure that these offers could not be easily accepted by shareholders. Instead, the Board resolved to issue new shares to Savannah at 25 percent of the price offered for the shares by Lekoil Nigeria pursuant to the cash offer and effectively agreed to hand over the entire assets of Lekoil Nigeria Limited to Savannah for US$1 million under the terms of the Option Agreement that subscribers were being asked to approve at the extraordinary general meeting of 7th April 2022 (whilst proposing to pay themselves approximately $300,000 per annum).
The Lekoil Nigeria Chairperson further disclosed the company considered that the Board of Lekoil Cayman had knowingly entered into financing arrangements that would lead to a significant diminution in the value of the investment of subscribers of Lekoil Nigeria. She said that was done intentionally and had culminated in the takeover attempt ‘orchestrated initially with Metallon Corporation and now being implemented with Savannah’.
Explaining further, Muhammed-Oyebode said that: ‘In the circumstances, the Chief Executive Officer, Mr Olalekan Akinyanmi (who is the single largest non-institutional shareholder and the founder of the company), had no choice but to petition the Grand Court of Cayman Islands (where the Lekoil Cayman is incorporated) for a just and equitable winding up of the company, on the grounds of the oppressive conduct of the Board, whilst at the same time seeking to set aside the agreements entered into with Savannah and the unauthorised issue of shares to Savannah and other parties.
“Shareholders should not however be alarmed. Mr Olalekan Akinyanmi is seeking to ensure that shareholders that placed their trust in himself and the company do not lose their investment as a consequence of the de facto takeover of the company that the Board has concluded with Savannah. The petition, together with the efforts to set aside of the transactions with Savannah, are intended to ensure that the interest of shareholders is fully protected.
‘Shareholders should understand that the steps that have been taken by Mr Akinyanmi, the founder of the company, are intended to protect your interest. It is time now to place your faith in the right party’.
Last week, Lekoil Limited announced its rejection of Lekoil Nigeria’s offer to purchase the Oil Prospecting Licence (OPL) 310 loan. It also turned down Lekoil Nigeria’s request to repay the outstanding amount under the Savannah Energy Investments Limited convertible facility agreement.
In its statement, Lekoil Limited maintained it was incapable of accepting Lekoil Nigeria’s offer without being ‘in breach of written legally binding obligations to Savannah’, which is another party to the deal.
Commenting on Lekoil Limited’s decision, its Interim Executive Chairman, Anthony Hawkins said that even if the company were to consider Lekoil Nigeria’s offer, it was not likely to be a superior offer to any other. It premised that decision on several reasons.
‘Lekoil Nigeria has not demonstrated the capability to fund the offer’, Hawkins said, and added: ‘It (Lekoil Nigeria) has not, since 2013, shown any evidence of the ability to fund the appraisal and/or development of OPL 310 (the licence for which is due to expire in August 2022 due to inactivity); it would be using Group cash to which the shareholders already have an entitlement to; and it has chosen to conduct the negotiation process by way of public announcement rather than private dialogue with the company’.
Hawkins’ statements then concluded: ‘For these reasons, the offer should not be seen as a serious attempt to provide an alternative to the company and its shareholders but as an attempt to muddy the waters prior to the Extraordinary General Meeting. I would encourage shareholders to vote by way of proxy at the EGM in favour of the resolutions’.