JKX restricts dissenters from voting at June 5 AGM - Analysts' View

04.06.2013
| Forbes.ua
JKX Oil & Gas’ (JKX LN) board of directors restricted Eclairs Group and Glengary Overseas shareholders, which hold 38.98% of total voting rights, from attending or voting at the company’s AGM on June 5, JKX reported on May 31. The senior analyst at Dragon Capital Denis Savka notes that the shareholder conflict won’t threat JKX’s current operations. "The Company itself (JKX) is not involved in the exploration and production part of the business, the operations are conducted via its daughter companies and their operations in Ukraine aré well established."  

JKX Oil & Gas’ (JKX LN) board of directors restricted Eclairs Group and Glengary Overseas shareholders, which hold 38.98% of total voting rights, from attending or voting at the company’s AGM on June 5, JKX reported on May 31

The restriction is based on the company’s inability to determine the ownership structure and voting arrangements behind the two mentioned entities. As a result of the board decision, the total number of voting rights at the AGM has been reduced to 104,779,774 ordinary shares. In a separate statement also released on May 31, Eclairs said it’s currently negotiating with other shareholders to vote against the current management’s re-election.

Concord Capital comments on the news: Depriving Eclairs and Glengary their voting rights creates the conditions for a legal dispute to prevent the upcoming AGM, or recognize its results as invalid. Alternatively, we might see a takeover bid from Eclairs and Glengary at a premium to the current share price. Regardless of the outcome of this conflict, we see the rising tensions at JKX as having a positive impact on its share performance in the short term.

The management shake-up has already stimulated some positive news flow on the company’s operations, which is aimed at demonstrating the efficiency of the current management. The long-term perspective, however, looks gloomy in our view. The company’s current management has undermined shareholder value by concentrating on Russian field development while neglecting highly profitable operations in Ukraine. The efficiency of the possible new Eclairs-related management also looks questionable considering that Ukrnafta – Ukraine’s largest oil producer that is controlled by Kolomoisky – is facing the same problem of declining hydrocarbon production.

Managing partner at "Asters” law firm, Alex Didkovskiy believes that the failure to respond to a request from the Board of Directors by the minority shareholders may be regarded as an attempt to deceive the other shareholders. Overall, therefore, the action of the

Board JKX adheres to the rules established by the British stock market.

The senior analyst at Dragon Capital Denis Savka notes that the shareholder conflict won’t threat JKX’s current operations. "The Company itself (JKX) is not involved in the exploration and production part of the business, the operations are conducted via its daughter companies and their operations in Ukraine aré well established."

Director of Energy Research Institute Dmitry Marunych says that "Privat" Group is regarded by the investment community as being prone to aggressive acquisitions. "After the conflict with Ferrexpo, where Privat Group tried to appoint Gennady Bogolyubov and Gregory Gurtovoy to the Board of Directors, as well as the conflict with Australian Consolidated Minerals, “Privat Group’s” image in the West has become entrenched with raider attacks, and the current fears expressed by the Board of Directors of JKX cannot be considered groundless” said Mr. Marunych. According to him, the other shareholders of JKX are likely to support the Board of Directors. "It is unlikely that the company would generally start a confrontation with" Privat Group ", without the support of major shareholders," - he said.