SDX Energy PLC (AIM:SDX, OTC:SDXEF) merger into Canada-listed Tenaz Energy Corporation has been thrown into doubt as a group of shareholders say they will vote against the deal.
Aleph Commodities, described as a global trading and investment company, on behalf of itself and other parties represents some 25.65% of the company’s issued share capital, SDX noted in a statement, and it has said it intends to go against the SDX board’s recommendation in favour of the deal.
It comes ahead of a planned shareholder meeting intended to rubber stamp the Scheme of Arrangement that would advance the proposed merger.
SDX shares this morning dipped to 10p in London, from 10.5p.
In May, SDX announced the merger that would see shareholders receive 0.075 new Tenaz shares for every SDX share they hold, at that time the offer was pitched at a premium of around 24%, and, in June, SDX shareholders were also given the option to accept an alternate cash offer pitched at 11p per share.
Earlier this year, in February, SDX sold a third of its stake in its flagship South Disouq asset in Egypt for US$5.5mln and returned US$3mln to shareholders indirectly through share buybacks.
SDX today said it was considering the contents of the Aleph letter and will issue a further announcement in due course.
Meanwhile, SDX noted that the shareholder’s letter stated: “Aleph welcomes the opportunity to engage with management and the board of directors to explore opportunities to provide financial, commercial and technical support to SDX to ensure the growth of the company and its production base, with minimal dilution.”
A scheme of arrangement ordinarily requires more than 75% of votes cast to fall in favour of a proposal in order to proceed.
In an operations update in mid-June, SDX reported average entitlement production of 3,778 barrels oil equivalent per day which was 10% ahead of guidance.
A drill programme at the South Disouq project has this year made three discoveries, and, as a result, triggered an upgrade to the asset’s estimated resources. A seven-well drill programme was anticipated to kick off in Morocco, during July.
Last week, test results from one of the new wells were described as “good” but also came with some unexpected pressure data which will be explored further with additional testing – and the company flagged that more wells may be needed to commercialise the discovery.
SDX ended May with just over US$15mln of cash.
The company’s board, advised by Rothschild & Co in June said that it considered the terms of the share offer and the cash alternative to be fair and reasonable as it recommended shareholders vote in favour of the merger.