- CHANTICLEER
- Jun 20 2017 at 11:00 PM
- Updated Jun 20 2017 at 11:00 PM
Cash hunters strike trouble with attack on Molopo
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Nicholas Bolton from Aurora Funds Management failed to get his hands on the Molopo cash. David Rowe
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by
Tony Boyd
Activist investor Nicholas Bolton suffered an embarrassing blow to his credibility on Tuesday when shareholders in the cashed-up Molopo Energy rejected his attempts to install a new board.
Molopo was a classic target for Bolton's well-practised strategy of acquiring control of companies with liquid assets or lots of cash. This strategy was used successfully in recent years at Keybridge Capital and Aurora Funds Management. Keybridge previously owned Aurora and sold it to Bolton in July 2016.
Both these entities were used as vehicles for gaining a significant shareholding in Molopo. For a while the strategy was looking good, especially when there was an impression that the two companies and the entities they controlled were acting independently of each other.
At one stage it looked as though Molopo would deliver Bolton one of the biggest corporate prizes in his career. The oil and gas exploration company is sitting on about $67 million in cash.
One of the abiding features of Bolton's corporate plays has been a lack of transparency. The Molopo stoush was no different. It may have remained an opaque mess with victory for Bolton had the Australian Securities and Investments Commission not intervened in relation to Molopo's affairs.
ASIC made an application to the Takeovers Panel in April after watching Aurora lift its holding in Molopo to 17.89 per cent and Keybridge lift its holding to 19.44 per cent.
Meeting to remove directors
Look behind the Aurora shareholding in Molopo and you find a range of public and private entities which manage money on behalf of investors. Investors in these funds have not enjoyed fantastic performance.
On March 13, Molopo said it had received a notice from Keybridge requisitioning a general meeting seeking the removal of all of Molopo's directors and the appointment of three Keybridge nominees as directors of Molopo.
Then, on March 27, Molopo said that Aurora would also seek the appointment of an Aurora nominee as a director of Molopo.
In April, ASIC took the view that Keybridge and Aurora were associated with one another and their combined shareholding in Molopo was 37.33 per cent, in contravention of the Corporations Act.
ASIC sought interim orders restraining Keybridge and Aurora and their respective associated entities from exercising any voting rights, acquiring any further relevant interests in Molopo and disposing of any Molopo shares.
ASIC also sought final orders that any Molopo shares acquired by Keybridge and Aurora since July 4, 2016, be vested for sale, that Keybridge and Aurora and their respective associated entities lodge a substantial shareholder notice disclosing their voting power in Molopo and Keybridge, and Aurora and their respective associated entities be prohibited from making any further acquisitions of Molopo shares that would exceed a combined 20 per cent.
ASIC and Bolton are no strangers to each other. In December 2015, Bolton was disqualified from managing a corporation. Bolton has lodged an appeal against this with the Administrative Appeals Tribunal.
That ban order forced him to resign as managing director of Keybridge.
The Takeovers Panel found that Bolton was a consultant to Keybridge and provided Aurora with advice, including in relation to its investment in Molopo.
Another important player in all this is John Patton. He owns half of Seventh Orion, which owns Aurora and 26 per cent of the units in the Aurora Investment Unit Trust. Bolton holds 49.9 per cent of units in the trust.
At the end of May the Takeovers Panel made a declaration of unacceptable circumstances in the affairs of Molopo.
"The panel considered that the involvement of Mr Bolton (or Mr Bolton together with Mr Patton) in Keybridge and Aurora gives rise to unacceptable circumstances in relation to the affairs of Molopo," it said.
'Conflicted in his role'
"This was the case despite the panel not finding, given the material before it, that Keybridge and Aurora were associates in relation to Molopo."
The circumstances of the declaration make interesting reading because they shed light on Bolton's relationship with Patton and the linkages between Bolton's private company, Australian Style Group (ASG), and Aurora and Keybridge.
"Mr Patton is conflicted in his role at Keybridge in relation to the acquisition or use of Molopo shares given his role at Aurora," the panel said.
"The panel found that Bolton effectively controls or has substantial influence over the relevant affairs of Aurora, effectively controls or has substantial influence over the relevant affairs of Keybridge's largest shareholder, ASG, has significant knowledge of the investment strategies of each of Keybridge and Aurora in relation to Molopo, and has the capacity to influence significantly the investment strategies of each of Keybridge and Aurora in relation to Molopo."
The panel is yet to publish its reasons for the declaration of unacceptable circumstances, but Bolton has already applied for a review of the panel's decision.
When the curtain came down on the Molopo annual meeting on Tuesday it was apparent that the entire exercise was an embarrassment for Bolton.
Shareholders voted in line with the directions of the board and rejected the candidates put forward by Keybridge and Aurora.
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