LONDON (Alliance News) - JKX Oil & Gas PLC received a much-needed boost on Wednesday, saying it has gained the support of Institutional Shareholder Services Inc in its battle against major shareholder Proxima Capital Group.
JKX Oil shares were trading up 3.0% to 26.00 pence per share on Wednesday morning.
Russia-based JKX Oil is holding a general meeting toward the end of the month after facing strong opposition from Proxima, its second-largest shareholder, holding around 20%.
Proxima is looking to remove seven out of JKX Oil's nine board members and has proposed replacing them with five of its own nominees as directors, with shareholders set to vote on the proposals on January 28.
Proxima argues the current board of JKX Oil has failed to deliver on its promises and underperformed for many years and also questions the "unacceptable corporate governance" of the company, claiming the board lacks independence and has lost key relationships with institutional investors in the company.
JKX Oil's defence against Proxima's latest claims is that the shareholder is trying to take over the company without paying a fair premium and that reshuffling and downsizing the board would remove a substantial amount of experience. JKX Oil also questioned Proxima's plan for the business.
On Wednesday, the JKX Oil board received a boost after Institutional Shareholder Services supported the board's view that shareholders should vote against the proposals tabled by Proxima.
The ISS is a corporate governance and proxy advisory firm, providing shareholders with advice on voting matters. ISS considered influential, recently for example supporting the proposed mega-merger between Royal Dutch Shell PLC and BG Group PLC.
"ISS recommendations confirm the board's view that Proxima has not presented a justifiable case for its proposals. Accordingly, ISS concludes that support for Proxima's requests is not warranted," JKX Oil said Wednesday.
JKX's board comprises of Chairman Nigel Moore, Chief Executive Paul Davies, Finance Director Cynthia Dubin, Commercial Director Peter Dixon, Technical Director Michael Miller and four Non-Executive Directors Lord Oxford, Dipesh Shah, Richard Murray and Alastair Ferguson.
Proxima wants Murray and Ferguson to stay on the board as non-executive directors for continuity purposes, and has proposed appointing the former chief operating officer of Ernest & Young, Paul Ostling, as JKX Oil's new chairman, with the aim of bringing board experience of international blue-chip companies in the UK, US and Russia.
Tom Reed, who has over 20 years of experience in the business and energy within Ukraine and Russia, would become JKX Oil's new chief executive under Proxima's proposals, whilst qualified accountant Russell Hoare, who also has 15 years experience working within Ukraine and Russia, would become JKX Oil's new chief financial officer.
Proxima said all three of those candidates are independent of the Proxima. However, the shareholder also proposed appointing two of its own representatives to the board, namely Proxima Chief Executive Vladimir Tatarchuk and Managing Director Vladimir Rusinov.
Although JKX Oil denies it has underperformed, the company has had problems with shareholders. Its largest shareholder, Eclairs Group Ltd, previously tried to oust the management of the company. Back in December, Eclairs won a court case against the company after JKX Oil tried to count its voting rights as void over a three-year period.
Eclairs, which holds around a 27.5% stake in JKX, is expected to support the proposals made by Proxima, and together the two hold a 47.4% stake in JKX Oil.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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