South African company Metallon’s bid to take over Lekoil suffers hitch

The attempt to take over the control of Lekoil Limited by South African mining company, Metallon Corporation, is not going according to plans as two out of three board members it appointed have resigned in quick succession.

A source told BusinessDay that Michael Ajukwu, who was appointed chairman of the AIM-listed Lekoil Limited in January 2021 by Metallon Corporation, as well as George Maxwell have both resigned.

Following a decline in the price of Lekoil Limited shares in 2020, Metallon, which has unsuccessfully conducted mining business in Zimbabwe and South Africa, mopped up 15 percent of the company’s shares, thereby becoming the majority stakeholder in a veiled bid to assume control of Lekoil Nigeria Limited (an affiliate company), its subsidiaries and assets.

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The move has generated heated controversy.

“According to its shareholder’s agreement, Lekoil Limited is a minority shareholder in Lekoil Nigeria and thus Lekoil Limited cannot generally compel Lekoil Nigeria to follow a particular course of action,” the source said.

Based on the relevant Nigerian laws and extant agreements between Lekoil Nigeria and its respective shareholders, Lekoil Nigeria and its subsidiaries remain directly responsible (to the exclusion of any third parties) for their governance.

The risks implied should Lekoil Limited attempt to arm-twist Lekoil Nigeria are clearly stated in the “Admission to AIM” document which is available in the Investor Relations section of the Company’s website, the source said.

“Metallon was indeed advised of this before attempting an ’empty’ takeover attempt, a sentiment that likely led to the resignation of Ajukwu. All of Lekoil Nigeria’s assets and those of its subsidiaries remain under its control,” the person said.

“George Maxwell’s resignation gives the impression that he would not like to be bogged down by the complexities associated with trying to gain control of Lekoil Nigeria, a company that has been painstakingly built for the past 11 years. He accepted a new position at a company where he was already a Board member.

“Only Tom Richardson, the third of the appointees, who also doubles as a Metallon employee, is left as he remains stuck to his employer,” he said.

Founded in 2010 by some oil sector professionals, Lekoil has an ambition of becoming one of the world’s leading exploration and production companies focused on Africa.

The company was rocked by a fake loan deal gone awry in January 2020, which was one of the reasons Metallon called for the removal of Lekoil’s chairman and restrictions on the affairs of Lekoil’s principal subsidiary, LEKOIL Nigeria Limited, over governance issues.

Other allegations include a lack of growth in productivity at Otakikpo, unmet market expectations, the Board’s loose interpretation of the dissemination of price-sensitive information, and issues with executive remuneration.