dud deal, page-3

From Fin Review online breaking news section

Activist pushes to overhaul Roc Oil board
AMANDA SAUNDERS

Contrarian fund manager Simon Marais is poised to call an extraordinary general meeting this week in a bid to oust the Roc Oil board over anger about the company’s $800 million “merger of equals” with Horizon Oil, which is set to ­proceed without being put to Roc shareholders.

Mr Marais of Allan Gray, Roc’s ­biggest shareholder with a 19.9 per cent stake, has been sounding out replacement directors to offer up should ­fellow investors back his bid to overhaul the board.

He is highly critical of the friendly zero-premium merger not being put to Roc investors.

A loophole in listing rules allows one company to buy another with scrip without getting approval from its own shareholders. Only Horizon share­holders can vote on the deal.

“It is getting pushed through by a merchant bank that gets paid a ­success fee; they are exploiting this little loophole,” Mr Marais said. “It is being done at a massive discount [for Roc investors] and the savings of ordinary ­Australians are being used for some massive empire building. But they are trying to avoid scrutiny at all costs.”

Mr Marais said he wanted to give the board – including Roc chairman Mike Harding and chief executive Alan Linn – and its adviser more time to reconsider and put the merger to investors for a vote. But he was planning to lodge the paperwork this week to call a vote on the board revamp.

Under the deal, Roc will get 42 per cent of the merged company despite putting in most of the assets and cash, Mr Marais said.

Horizon shareholders get 0.724 of a Roc share for each of their own.

Macquarie Equities calculates the merger favours Horizon shareholders.

It says that using its valuation for both stocks, the terms dilute Roc’s core valuation by 16 per cent, while increasing Horizon’s by 15 per cent.

In terms of earnings, Horizon is also better off, seeing a 39 per cent increase for 2014 earnings per share while Roc sees a 29.5 per cent decrease, it says.