The securities watchdog has delayed a decision on whether to grant a waiver to allow for the transfer of shares in Nexus Energy to Seven Group Holdings as it continues to ponder the disputed issue of valuation for the debt-laden oil and gas explorer.
The delay in the ruling by the Australian Securities and Investments Commission increases the likelihood that Seven Group may need to further extend the funding lifeline it has provided to Nexus as the troubled $180 million takeover proposal edges toward a resolution. The $165 million funding facility, which was extended last month, lapses on Friday.
Seven Group's takeover plan for Nexus, whose former chairman Don Voelte is Seven's current chief executive, has been plagued by controversy both because of a perceived conflict of interest by Mr Voelte and the belief among Nexus shareholders that it significantly undervalues the company and its chief asset, a stake in the Crux gas and condensates field in the Timor Sea.
Shareholders in Nexus in June voted down a takeover proposal from Seven Group that would have given them 2¢ per share, with the result that the energy player was placed in administration. Seven, which sees Nexus as an important part of its new energy business and has acquired Nexus's senior debt, then sealed a deal for the takeover with administrators McGrath Nicol under which Nexus shareholders get nothing for their shares.
Several shareholders in Nexus, including about 14 per cent of the register that is represented through the Nexus Battle group, have lodged objections to ASIC on the fairness of the deal.
Their concerns have not been reduced by a the October 31 release of a further independent expert's report that found that the takeover by Seven Group was the best solution for Nexus and did not unfairly prejudice shareholders.
In a submission to ASIC, Nexus Battle said it continues "to believe that there is significant value remaining in Nexus assets, that in either a Going Concern or Liquidation scenario there will be sufficient equity remaining so as to provide a return to shareholders."
As a result, Nexus Battle told the regulator that "a transfer at nil consideration will fail to satisfy ASIC's criteria for procedural fairness to third parties when considering Nexus' application for relief".
A spokesman for ASIC said the regulator had not yet made a formal decision about whether to grant relief from the takeovers provisions, which is one of the conditions precedent for the transaction.
"The letter we have sent the applicant flags that in making our decision we are at this point focused on the value of the shares and are following what emerges about the valuation of the shares as part of the court process," the spokesman said.
According to a copy of the letter obtained by the Australian Financial Review, ASIC said it expects the timing of its decision on the waiver "will depend on when we are satisfied that there is unlikely to be any further information produced as part of the s444GA court process that is significantly relevant to the valuation of the Nexus shares." It didn't give any further indication of the timing of its decision.
The ASIC relief would ensure that a Court approval for the transfer of shares in Nexus under Section 444GA(1) of the Corporations Act can be effective without contravening Section 606.
