The majority shareholder of Lekoil Cayman, South African miner, Metallon has sold off its stake in London-listed Lekoil Ltd, driving down the value of the company’s shares 41 percent at 0.90 pence.
“The Company notes that it is in dispute with Lekoil Nigeria about the day-to-day control of the Lekoil Group…” Lekoil Ltd (Cayman) said in a regulatory note on Thursday, sending investors scrambling.
Lekoil shareholders have been enmeshed in a tussle leading to the firing of its CEO, Lekan Akinyanmi in June over what it called governance breach arising from a loan dispute.
Akinyanmi however, retained control of the Nigerian arm of the company – Lekoil Nigeria,
Lekoil Ltd (Cayman) has a minority 40 percent stake in Lekoil Nigeria Ltd and Akinyanmi was the CEO of the entire operation prior to his ouster. The Nigerian unit was financed by loans acquired through Lekoil Cayman and is entitled to over 90 percent of the economic benefits of Lekoil Nigeria,
Metallon with 15.1 per cent stake in Lekoil Ltd was accused of staging a hostile takeover last year when it convinced other shareholders to turn the heat on Akinyanmi, who it accused of poor governance practices. The departure of Metallon creates more uncertainty for an already troubled company.
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This situation has left the London-listed Lekoil Cayman gasping for survival as it forages for cash to keep the company going.
The task of raising financing may become tougher considering that Lekoil Cayman has been unable to publish its annual financial report in June. It has asked for more time from its regulator on the London Stock Exchange.
“The Company has received notification from Lekoil Nigeria that it intends to abide by the Shareholders Agreement but that governance decisions, including decisions related to budgets, financial, operational and business plans, shall be made by Lekoil Nigeria,” said the note from Lekoil.
However, Lekoil Nigeria said it will no longer fund any of the costs of the Company from the cash flow generated from its producing asset, Otakikpo.
The London-listed Lekoil Cayman admitted that it has limited control over the day-to-day operations of Lekoil Nigeria and its subsidiaries, and that it will take legal advice to recover as much value from its assets as possible.
Lekoil Ltd is seeking to raise a convertible facility agreement (CFA) worth £200,000 from Hadron Master Fund and TDR enterprises to fund its legal battle against Lekoil Nigeria.
Hadron is linked to a company that has a 4.66 percent stake in Lekoil. TDR is controlled by Tom Richardson, who Metallon backed as a non-executive director of Lekoil. An unnamed third party will also provide some cash.
Lekoil Ltd also intends to pursue its former CEO to recover the loan. It believes $800,000 is immediately payable, with $400,000 due on September 9.
Lekoil Ltd provided the majority of funding for the acquisition of the Lekoil Nigeria assets, as well as working capital for a period of time.
The Company said it raised over US$260m of equity on the London Stock Exchange and the majority of these funds were invested into Nigeria.
