PETROCELTIC, the Irish oil explorer that swallowed Edinburgh firm Melrose Resources, has become embroiled in controversy after a Swiss hedge fund called on investors to block its plan to raise £30m from a Malaysian investor.
Worldview Capital Management said the fund-raising proposed by Petroceltic would grant unjustified influence to the Dovenby Capital business led by Dato' Ahmad Fuad and allow it to invest on preferential terms.
Worldview also accused Petroceltic of spurning an offer to provide funding on better terms than offered by Dovenby without telling shareholders about it.
The fund's anger was triggered by plans Petroceltic announced earlier this month to enlist Dovenby as a strategic investor.
Chaired by Robert Adair, who founded Melrose, Petroceltic said Dovenby was ready to provide £30m as part of a $100m (£59.7m) placing. It said the funding, to be raised at 157p per share, would give it the flexibility to pursue its options.
The shares would give Dovenby control of around 9% of Petroceltic's shares. Dovenby would be able to appoint one non-executive director to Petroceltic's board.
Petroceltic has proposed that existing shareholders should give up their pre-emption rights in respect of the shares it wants to sell to Dovenby.
By exercising their pre-emption rights, shareholders can maintain their percentage holdings in companies' shares.
The Dublin-based company called an extraordinary general meeting for June 9 where it wants investors to allow the issue of all the shares concerned on a non-pre-emptive basis.
Worldview urged shareholders to vote against what it called the wholly unjustified removal of pre-emption rights at the meeting.
In a statement it said: "The placing represents an abuse of fundamental and statutory pre-emption rights to the detriment of existing shareholders by granting preferential investment terms and an unjustified level of influence to a single new shareholder, Dovenby."
Worldview added: "The board did not disclose to shareholders, nor has yet explained, its reasons for rejecting an offer by Worldview effectively to underwrite the placing at a higher price which would have respected pre-emption rights."
Worldview said it had offered to subscribe for up to $100m of new ordinary shares at £1.62 while allowing shareholders who wanted to to maintain their holdings.
It said Petroceltic had provided insufficient information about Mr Fuad, although it proposed to work with Dovenby in what might entail a change of strategy.
Woldview concluded: "The manner in which the Board has conducted the Placing has effectively turned corporate governance on its head, allowing the Board to choose its preferred shareholders rather than shareholders choosing their board."
The hedge fund, which controls 17% of Petroceltic shares, said it believed investors with 19% of Petroceltic shares already intend to vote against the EGM resolution. If more than 25% of the votes cast at the EGM are against the relevant resolution it will not be passed.
In response Petroceltic said: "The Board of Petroceltic considers the passing of the EGM Resolution and the completion of the Placing to be in the best interests of the Company and its Shareholders as a whole and will continue to seek to engage with Worldview in relation to the matters raised."
It added: "The Board is pleased to note the support for the Placing received from a leading provider of corporate governance solutions and proxy advisory services," without elaborating.
A source familiar with the situation noted if Worldview bought $100m shares it would have a very big shareholding in Petroceltic and might be required to make an offer for the firm.
Melrose has said Dato' Ahmad Fuad is an experienced Malaysian oil and gas industry specialist. He was deputy chairman of Bumi Armada Berhad, which owns and operates Floating Production, Storage and Offloading units and Offshore Support Vessels,
until his retirement in June 2013.
Petroceltic recently posted a $19m loss for 2013 after writing off $37m on unsuccessful wells in Egypt, Bulgaria and Romania.
The company bought Melrose in 2012 in a £165m deal and kept its Edinburgh base.