Bechtel Australia, the biggest shareholder in Nexus Energy, has questioned Seven Group chief executive Don Voelte on his performance as Nexus chairman in the lead-up to his resignation and Seven’s subsequent bid.
In a letter to Mr Voelte obtained by The Australian, Bechtel chief executive Andrew Greig says the 2c per share bid materially undervalues the company and recent events around Nexus raise questions about how confident ASX investors can be about adherence to corporate governance principals.
In a new revelation, the letter says Thai oil company PTTEP was looking to pay 25c per share to build a 17 per cent stake in Nexus in late 2012 — a move Mr Greig says Nexus chief Lucio Della Martina urged him not to consider because it would materially undervalue the stock, which was then trading at 15c.
Bechtel, a global engineering and construction contractor, last week lifted its take in Nexus from 6 per cent to 11 per cent.
Mr Voelte stepped down as Nexus chairman in February, citing conflict of interest issues because the Kerry Stokes-controlled Seven had recently said it was exploring oil and gas acquisitions. A month later, Seven and Nexus announced they had agreed to a 2c per share bid, which was just a third of Nexus’s share price just after Mr Voelte left and when it went into a trading halt because of an outage at its Longtom field in Bass Strait.
Looming debt deadlines and a legal claim over a drill rig that would see Nexus go into administration without Seven’s help led to the low bid.
Nexus has since said Mr Voelte had recused himself from board discussions on the Seven bid since December, when Nexus advisers Deutsche Bank approached Seven. Seven has said Mr Voelte was also not involved in the discussions.
“As chairman, you had an obligation to ensure the path that the company had been directed down since December 2013 was in the best interests of Nexus shareholders and that alternative proposals were still being advanced with respect to asset sales, refinancing and recapitalisation proposals, in line with the strategy outlined by Nexus at the past two annual general meetings,” Mr Greig says in the May 9 letter.
“I acknowledge you recused yourself from direct discussion concerning SGH acquiring Nexus while chairman, but what has emerged following your resignation is that SGH has placed Nexus in a ‘bear hug’ by controlling the debt of Nexus, while the company has seemingly few alternatives, apart from engaging with SGH.”
Mr Greig said he was concerned the proposed scheme may be significantly below representations made by Seven in discussions before Mr Voelte stepped down, when the shares were trading at 7c.
“I have concerns for all Nexus shareholders with respect to the course of events that has transpired recently, but also (for) all investors on the ASX, who rely on the integrity of our financial markets through the adherence to appropriate corporate governance principles, to feel confident in investing in listed companies.”
Mr Greig backed up his view that the stock was undervalued by boosting his stake in Nexus from 6 to 11 per cent as the shares fell to 1.9c on Thursday and Friday. They were trading for the first time since a halt in February, when they last traded at 5.9c.
An independent expert’s report by Deloitte released on Wednesday valued the shares at between negative 2c and 4c.
Mr Greig said there appeared to be a flaw in the valuation of Nexus’s stake in the offshore Crux oil and gas field in Western Australia, which had been valued at between $115 million and $155m, compared with a $202m net book value of Crux.
This would put the value of Nexus share between 3.5c and 7.5c and mean a 2c offer could not be considered fair and reasonable, Mr Greig said.
Nexus and Deloitte stood by the valuation.
Mr Greig said after his adviser was approached by PTTEP on October 3, 2012, Mr Della Martina contacted Mr Greig to say this would materially undervalue the value to be extracted from the assets.
“Notwithstanding the company’s balance sheet issues, I am dismayed that 2c is now purported to be fair and reasonable value,” he said.
Bechtel is the biggest private US construction contractor and responsible for half the LNG plant construction the globe. It was not involved in the construction of the Pluto LNG project started by Woodside Petroleum when Mr Voelte was at the helm. Seven Group declined to comment and Mr Voelte could not be contacted.