Tuesday, 22 July 2014
Bridging the gulf
Kurdish oil clash involves unlikely tough guys
M&G and Capital Group are hardly limelight-hogging activist shareholders. Yet the two have forced four directors onto the board of Gulf Keystone Petroleum, after a war of words with management at the Kurdistan-focused oil explorer. Investors in British public companies rarely reach for this weapon, but it’s good to know it can work.
M&G, angry about pay and governance, had used its prerogative as the owner of more than a 5 percent stake to propose new directors. Initially, the plan was opposed by Gulf Keystone managers. Then came rumblings that M&G and Capital could oppose the appointment of Simon Murray, formerly of Glencore. He was being lined up as chairman in a move that would relieve the current dual-role boss, Todd Kozel, of one of his two hats. Now peace has broken out just ahead of the July 25 annual meeting: M&G gets its directors, and the investors will support Murray as chairman.
These are unusual tactics for Britain. There have been isolated cases, such as Edward Bramson’s boardroom coup at F&C, the fund manager, where the activist installed himself as chairman in 2011. But, mostly, power is exercised through quiet words rather than overt action. M&G and Capital Group, which owns another 5.6 percent of the company, rarely tend to make a squeak in public.
But Gulf Keystone is something of a special situation. A former penny stock, the company now boasts a 1.5 billion pound market capitalisation, but remains largely owned by retail investors. That made it harder to exert pressure the usual way, through behind-the-scenes lobbying. And the company is keen to move from London’s junior bourse, the Alternative Investment Market (AIM), to the main list next year. That gave it more reason to back down.
So it is hard to see this as a harbinger of a wider trend. Still, after the governance wrecks at Bumi and ENRC, it is heartening to see normally quiet institutional investors take the public route if or when it proves appropriate. And if the threat of such action helps keeps other London-listed companies on their toes, so much the better.
Context News
Gulf Keystone Petroleum, the Kurdistan-focused oil explorer, said on July 21 it had reached a “constructive agreement” with its biggest shareholders over governance. The agreement comes ahead of the AIM-listed company’s annual general meeting on July 25.
Under the deal, Gulf Keystone will no longer oppose four board nominees proposed by M&G, whose Recovery Fund owns 5.1 percent of the company. In turn, M&G and Capital Research Global Investors, a unit of U.S. investment firm Capital Group, will approve the election of Simon Murray, the former Glencore chairman, as the company’s independent non-executive chairman. Capital owns a 5.6 percent stake of Gulf Keystone.
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