Cantillon: A waiting game for Worldview at Petroceltic

As expected, dissident shareholder Worldview Capital has brought its war against the board of Petroceltic International to the High Court in Dublin.

It is difficult, however, to see where Worldview can next bring its campaign to oust the board and, presumably, precipitate a sale of the company or its assets.

Worldview has launched a lawsuit here to replace one that was rejected from London courts in May on jurisdictional grounds. It accuses the board of breaching a shareholders’ agreement with it, which the company denies.

Worldview tried to oust Brian O’Cathain and the chief executive earlier this year at an egm, but lost. It has about 29 per cent, enough to block special resolutions that need a 75 per cent majority, but is powerless to block ordinary resolutions requiring a simple majority, such as director appointments.

It is in a tight spot. Unless it can influence how more shareholders vote at egms and agms, its campaign will go nowhere. It can’t acquire many more shares without breaching 30 per cent and triggering a requirement to bid for the company.

If it formally hooks up with one of the other shareholder blocs to frustrate management, it could then be deemed to be acting in concert with another party. This would become relevant in any potential takeover situation in future, if the concert parties held more than 30 per cent together.

Worldview needs leverage over Petroceltic, which means it needs to force a shareholders poll requiring a special resolution – a 75 per cent vote, which it could block and defeat the company.

Petroceltic does not need shareholder approval to issue bonds, so Worldview cannot block the $175 million issuance currently planned. Neither can it take control of the board, because director appointments only require a 50 per cent-plus-one-vote majority.

Worldview’s best hope is that at some stage in the not too distant future, Petroceltic will need to raise fresh equity, where its imprimatur would be necessary – a share placing requires a special resolution.

Currently, it’s party time in the bond markets, so Petroceltic should have no problems tapping debt investors for now. But there is a limit to what the company can borrow while it is effectively locked out of equity markets.

To fund new exploration projects, the future of the company, Petroceltic will eventually need fresh equity. It remains to be seen whether Worldview is prepared to wait that long to get what it wants.