Companies - application for the sanction of a scheme
Before : |
R. J. MacRae, Esq., Deputy Bailiff, and Jurats Ronge and Entwistle |
IN THE MATTER OF THE REPRESENTATION OF SERINUS ENERGY PLC
AND IN THE MATTER OF ARTICLES 125 & 126 OF THE COMPANIES (JERSEY) LAW 1991 (AS AMENDED)
Advocate S. J. Alexander for the Representor.
ex tempore judgment
the deputy bailiff:
1. Serinus Energy Plc ("the Representor") was originally incorporated in Alberta, Canada on 16 March 1987 with the name Titan Diversified Holdings Limited. It changed its name in 1997 and again in 2008. In 2010 it began trading on the Warsaw Stock Exchange. On 24 June 2013, subsequent to its acquisition of a company which held the Representor's Tunisian and Romanian assets, it changed its name to its current name. On 27 June 2013, it commenced trading on the Toronto Stock Exchange. In March 2018 it was agreed that the Representor should cease to operate under the laws of the province of Alberta and continue as a Jersey company. Accordingly, on 3 May 2018, the Representor was established as a Jersey public company. In May 2018 it was voluntarily delisted from the Toronto Stock Exchange and commenced trading on the London AIM. The Representor is headquartered in London and its registered office is in Jersey. Its ordinary shares are admitted to trading on AIM and subject to the UK City Code on Takeovers and Mergers ("the Takeover Code").
2. The business of the Representor is as an international oil and gas exploration, appraisal and development company with operations principally in Romania and Tunisia. In Romania those consist of a substantial gas concession and in Tunisia the Representor owns two concession areas including a large oil field which may contain a substantial number of barrels of oil. Underlying the oil fields are significant gas prospects. The buyer, namely Xtellus Capital Partners Inc ("the Buyer") is a US based investment firm and subsidiary of a global financial advisory investment group incorporated in Delaware and headquartered in New York.
3. In summary, it is proposed that the Buyer will purchase the ordinary shares ("the Scheme Shares") of the Representor in exchange for consideration which implies that the Representor's entire issued and to be issued share capital is valued at approximately £5.1 million.
4. The Chairman's letter to the shareholders in the Representor indicated that on 24 March 2025 the directors of the Representor and the board of the Buyer announced that they had reached agreement on the terms of the recommended cash acquisition by the Buyer of the entire issued and to be issued share capital of the Representor.
5. The background to and reasons for the acquisition state that the Buyer took the view that the Representor had failed to gain the recognition of its delivery on its trading goals and continued to trade at a depressed share price, and that maintaining the Representor's listing on AIM and the Warsaw Stock Exchange incurred significant extra costs to a company of its size which had a market capitalisation of only approximately £3.8 million. This led the Buyer to take the view that the Representor would be better placed as a private business with access to capital which was currently beyond its reach.
6. The acquisition represented a relatively attractive premium of 30.8% to the client's closing price as at 21 March 2025, 41.7% to the closing price on 7 February 2025, the last business day before the acquisition proposal was made to the Representor, and 33.3% to the volume weighted trading average price for the thirty day period prior to 21 March 2025 - the latest practical date prior to the date of the announcement of the acquisition.
7. The Chairman's letter also indicates that the Buyer had received irrevocable undertakings from the directors of the Representor holding in aggregate some 5.285% of the existing issued ordinary share capital of the Representor, and also from other shareholders holding an aggregate of approximately 9.59% of the existing issued ordinary share capital of the Representor - totalling undertakings in respect of 14.88% of the existing issued ordinary share capital of the Representor.
8. The directors of the Representor recommended the acquisition to its shareholders as a fair and reasonable one.
9. On 4 April 2025, this Court convened the shareholders of the Representor to a meeting for the purpose of considering and, if they thought fit, approving the Scheme of Arrangement under Article 125 of the Companies (Jersey) Law 1991 (as amended), and at that stage considered the documentation placed before it, including the Scheme documentation and ordered that the Court meeting be held at the Representor's registered office in Jersey on 1 May 2025 and made various other standard orders for the purpose of convening the shareholders to the meeting. Included amongst those orders was the eleventh order that the accidental omission to give any holder of the Representor's shares the relevant notice or non-receipt of the notice should not invalidate the proceedings at the relevant court meeting. At the convening hearing the Court was satisfied that it was appropriate for the Scheme shareholders to meet as a single class, notwithstanding the irrevocable undertakings in support of the Scheme to which we have referred. The Court took the view there was no material difference between the interests of the various shareholders in this case.
10. At that meeting, the statutory requirements for sanction of the Scheme were comfortably met. The turnout was high. The percentage of Scheme shareholders present in person or via proxy at the meeting was 91.78%. Of those voting by number of ordinary shares voted - sometimes known as the voting rights test - 89.77% voted in favour and 10.23% voted against. By number of shareholders voting - the headcount test - 67.57% voted in favour and 32.43% voted against. Drilling down, although this purports to indicate that there were 37 shareholders who voted, in fact 17 shareholders voted exclusively in favour of the Scheme, 4 voted exclusively against the Scheme and 8 shareholders voted partially in favour and partially against the Scheme which is a familiar feature of schemes these days and indicative of the fact that those shares were voted by 8 nominee shareholders representing a larger beneficial class of shareholders some of whom voted in favour and some of whom voted against in respect of those shares, and this is explained in the affidavit of the director and chief executive officer of the Representor who also chaired the Court meeting, Mr Jeffrey Auld.
11. Immediately after the Court meeting, an extraordinary general meeting took place for the purpose of considering and adopting special resolutions having the fact of, inter alia, approving various amendments to the Representor's Articles of Association which were necessary for the purpose of carrying the Scheme into effect. It was necessary for the special resolution to attract the votes of three-quarters of the votes cast at the EGM. This occurred, with 91.74% voting in favour and 8.26% voting against.
12. There were certain matters which were specifically drawn to our attention which we needed to consider for the purpose of the application to approve the Scheme. First, was the fact that the share register provided to the Printer and Mailer did not list the shareholdings of seven employees of the Representor who had recently been issued additional ordinary shares. Four of these persons were not sent the Scheme document and forms of proxy in accordance with the Court order. Three (including Mr Auld himself) were existing holders of ordinary shares whose names did appear on the share register but the documentation that these three persons received indicated a lesser number of shares as they were all executives due to receive additional shares under the Company's LTIP Scheme. This error was noticed, and those three individuals were all able to vote in favour of the Scheme in accordance with the accurate number of shares that they held.
13. As to the remaining four shareholders, they too were notified of and supplied with the Scheme documentation. Between them they held less than 1% of the total of ordinary shares entitled to vote and three of them submitted forms of proxy - each of which supported the Scheme - within time. One was unable to do so. Accordingly, six of the seven shareholders affected by this error were able to vote and did vote in support of the Scheme and in any event this matter does not invalidate the Scheme in accordance with the order made by the court at the convening hearing on 4 April to which we have already referred.
14. The second matter which concerned the Court were the complaints received from an anonymous email address in relation to the Scheme. A number of emails came from the same anonymous email address. Three were sent to the Court and forty-one emails were sent - again from the same email address - to various advisers and regulators and these were matters that were addressed in the affidavit of Mr Auld and to that affidavit he also exhibited various of those emails. The complaints were tabulated in Mr Auld's second affidavit. Various complaints were made within the emails, for example that various persons connected to the Representor, including Mr Auld, should have no right to vote on the Scheme, that there had been a disregard for certain aspects of Polish law which might affect Shareholders resident there, that the Buyer was a "Russian founded" entity, that there had been repression of minority rights and that the consideration to be paid by the buyer was inadequate. None of these allegations appear to have any real basis but nonetheless we set them out so that it is clear they are matters that have been drawn to our consideration and we have to the extent appropriate, taken them into account. It appears that it is likely that all the complaints emanate from a person who is a beneficial, not registered owner, of approximately 1.3% of the shares who is identified in the second affidavit of Mr Auld but we do not name, simply in case there is a risk of misidentification. He is, so far as the Representor is aware, one of the persons who cast votes against the Scheme at the Court meeting.
15. As to the twelve shareholders who voted against the Scheme including the person to which we have referred, none provided the Representor with an explanation as to why they did so. None attended the Court meeting and none have attended today. It is worth recalling that the Scheme documentation in this case in the normal way made it clear that shareholders were entitled to attend and be heard at this hearing, either in person or through a Jersey advocate and may also submit written statements regarding the Scheme for the Court's consideration to be provided to the Representor's advocate. No written statements have been delivered, and no one has attended to object to the Scheme today. In order that we had complete clarity on the matter, Mr Auld has helpfully given evidence today in order to expand upon the contents of his affidavit and to give his opinions as to the reasons as to why it was that the 10% or so of Shareholders who voted against may have done so or to his knowledge did so. He has explained to us that as to approximately half of those shares, one 5% shareholder who has owned his shares for the past year or so will be selling his shares at a premium against what he paid for them but wanted a higher price. As to the shareholder who is likely to be the source of the email traffic to which we have referred who held approximately 1.3% of the shares, he is a person who has been a shareholder in the Representor for many years and so far as he is concerned has been adversely affected by the fact that a debt refinancing package of the Representor some years ago, which led to a corresponding issue of shares will have substantially diluted his shareholding with the effect that it was not possible either through this transaction or indeed any likely transaction that he will recoup his investment in the Representor. As to the balance of shareholders, Mr Auld does not know when they invested but assumes that their concern is in relation to the consideration they are to receive. It is helpful to have this material in front of us so that we have the full picture.
16. We have had regard to these matters, and we fully understand why it is, taking the circumstances overall, that Mr Auld and his fellow directors have considered that the Scheme is in the best interests of the Representor's shareholders as a whole and that the Scheme is a fair and reasonable one.
17. We have had regard to the contents of Article 125 of the Law and the relevant Jersey case law. We needed to be satisfied of the following matters, and are satisfied of them, in the following terms:
(i) The provisions of the 1991 Law have been complied with;
(ii) The class of shareholders was fairly represented by those who attended the meeting; and the statutory majority was acting bona fide and not coercing the minority in order to promote interests adverse to those other classes that they purport to represent;
(iii) The Scheme is such that an honest and intelligent person and a member of the class concerned and acting in respect of his or her interest might reasonably approve. The Court should be slow to interfere with the wishes of the majority and in this case the vast majority of shareholders who both voted and supported this scheme; and
(iv) There is no blot or defects in the Scheme, either drawn to our attention or which we were able to identify (see paragraph 13 of Re Wentworth Resources Plc [2024] JRC 020).
18. Accordingly, having considered and accepted the undertakings given by the buyer to be bound by the Scheme as set out in writing in a letter from the Buyer dated 14 May 2025 and repeated to us by Advocate Alexander on behalf of the Buyer, we sanctioned the Scheme and make the orders we were asked to make.
Authorities
Companies (Jersey) Law 1991 (as amended).