TOM Cross faces a battle for control of Lochard Energy after a group of investors said a bid of £14.5 million for the firm by the Parkmead Group he runs undervalued it.
A consortium of investors represented by Cornhill Capital and accounting for 20.37% of the outstanding shares in Lochard Energy in total said they do not intend to accept the all-share offer for Lochard Energy tabled by Parkmead Group last week.
Consortium members include Lochard Energy's former executive chairman Haydn Gardner.
The bid for Aim-listed Lochard represents the biggest move Mr Cross has made in his attempt to grow Parkmead into a significant North Sea business.
Mr Cross grew Dana Petroleum from a start-up into a firm with extensive North Sea holdings. He made around £57m when Korea National Oil Corporation bought Dana for £1.9bn in 2010.
Aim-listed Parkmead's bid won the recommendation from the board of Lochard Energy, which has been up for sale since last September.
Noting Parkmead's management team has a record of building a successful oil and gas business, chairman Clive Carver said the deal would allow Lochard shareholders to participate in the buyer's growth.
However, speaking for the dissidents yesterday, Cornhill said: "The group believes that the offer of 0.385 PMG (Parkmead Group) shares for 1 LHD (Lochard Energy) share materially undervalues the company."
The London-based investment group said consortium members include Haydn Gardner, who has a 5.86% holding. Mr Haydn left the company in March last year following criticism of his management by Henderson Global Investors, which speaks for around 29% of Lochard's shares.
Funds managed by Henderson are among investors who control 40.1% of Lochard's shares in total and who have given irrevocable undertakings, or letters of intent to vote in favour of the offer.
However, Cornhill's Adam Dziubinski said the Parkmead bid failed to recognise the progress made at Lochard Energy in recent months.
"The feeling is there's a bit of a Tom Cross premium in there," said Mr Dziubinski.
Cornhill believes the all share bid tabled by Parkmead requires Lochard shareholders to accept a low valuation for the company in the expectation Mr Cross will generate good returns for shareholders in the enlarged group in future.
He noted Lochard owns a 10% stake in the Athena field 110 miles north east of Aberdeen. This is producing around 1100 barrels oil daily.
Speaking for Cornhill rather than the consortium, Mr Dziubinski said: "On behalf of Cornhill clients we think 6p cash would be fair." A bid at that level would value Lochard at around £18m.
Asked if Parkmead Group would increase its bid, a spokesman for the firm said: "We are confident of receiving the necessary support for this transaction. We believe it is firmly in the interests of both sets of shareholders."
Shares in Parkmead closed up 0.375p at 12.75p. Shares in Lochard Energy closed down 0.25p at 4.5p.
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