Clive Palmer's Mineralogy Pty Ltd has withdrawn its challenge to Arc Energy Ltd, but the Perth-based company will still be required to proceed with a shareholders' meeting requisitioned by the Queensland-based investor.
Arc had called a general meeting for December 12, after Mineralogy last month sought a meeting to remove all of ARC's directors and scrap the proposed $1.1 billion merger between Arc and Anzon Australia Ltd.
Mineralogy holds a 6 per cent stake in ARC.
But in accordance with Arc's obligations under the Corporations Act and the company's constitution, the meeting cannot be cancelled and will go ahead as planned.
Mineralogy has agreed that it will abstain from voting at the meeting and will not attempt to provide a proxy form in respect of the meeting.
ARC managing director Eric Streitberg has previously said the company's merger plans had received "general support" from its shareholders.
Anzon selected ARC as a preferred merger partner after an extensive auction process.
The merger is also under pressure from Anzon's second largest shareholder, Nexus Energy Ltd.
Nexus was omitted from the auction process, but was not deterred from its own merger plans with Anzon, amassing a 17 per cent blocking stake in the target.
