The Australian Securities Exchange has decided to block transactions by two of Tony Sage's companies on grounds that controversial businessman Frank Timis would gain too much control.
The Australian Securities Exchange has decided to block transactions by two of Tony Sage's companies on grounds that controversial businessman Frank Timis would gain too much control.
Global Iron and International Petroleum, formerly International Goldfields, today announced that the ASX had used its "absolute discretion" to block the deals that were flagged some months ago.
International Petroleum had planned to acquire the Mr Timis-controlled Eastern Petroleum Corporation, which holds oil fields in Kazakhstan, while Global Iron was set to do a deal with African Petroleum Corporation which holds rights to oil and gas blocks in Liberia.
As part of the transactions, substantial amounts of capital were to be raised, with Mr Timis already receiving firm commitments of some $160 million.
On completion of the transactions, Mr Timis would have gained non-executive director position on the boards of both companies plus become a substantial shareholder.
The ASX said it decided to against the deals as Mr Timis would hold too much power and influence over Global Iron and International Petroleum, and that the ASX was not satisfied that both companies would comply with continuous disclosure rules.
ASX spokesperson Matthew Gibbs told WA Business News that the company is not completely blocking the deal, saying that it can go ahead, however if it does it will not admit Global Iron and International Petroleum to the official trading list.
"It's rare for ASX do this, however from time to time, ASX does exercise its powers to either not allow a company to list or to impose conditions on a company when listing, if we are concerned that a company would not meet the required standards of integrity, accountability and responsibility. It is not a discretion ASX exercises lightly," he said.
All parties acknowledged that Mr Timis has had a drug conviction from the 1990s and was executive chairman of Regal Petroleum, which was fined for breaches of AIM rules regarding continuous disclosures.
"The boards of both companies are aware of the rumours and innuendo that surround Frank Timis," Mr Sage, chairman of both companies, said.
"However, the boards based their respective decisions to enter into these transactions only on the facts as presented to them.
"ASX appears to have made its decision to block the GFE and IPO transactions on the basis of misleading articles about Mr Timis and on what might happen in the future, which is extremely disappointing."
He added that the companies will appeal the ASX decision and has not ruled out legal action.
It's not the first transaction between Messrs Sage and Timis, with Mr Sage's other company Cape Lambert Resources buying a Sierra Leone iron ore project from Mr Timis' company, African Minerals.
Mr Gibbs said that the ASX considered each matter according to its individual circumstances, adding that no two matters were ever the same.
The announcement is below:
The decision by ASX Limited to use its "absolute discretion" to block transactions by ASX listed companies International Petroleum Limited (ASX: IPO) (IPO) and Global Iron Limited (ASX: GFE) (GFE) could set a dangerous precedent for all companies listed, or looking to list, on the Australian Securities Exchange (ASX),, and undermine the standing of the ASX and the Australian securities market globally according to the Boards of both IPO and GFE (together, the Companies).
IPO and GFE - in two unrelated asset transactions - have announced that they propose to acquire private companies holding significant oil and gas assets in Kazakhstan and off-shore Liberia respectively.
The major shareholder of both private companies is UK-based entrepreneur, Mr Frank Timis who, on completion of the proposed transactions, would become a substantial shareholder in and non executive director of both IPO and GFE.
The Timis-lead private companies have acquired (or have the right to acquire) rights to oil and gas projects that independent valuers have determined to be of a significant size and value (see IPO ASX announcement dated 7 October 2009 and GFE ASX announcement dated 9 February 2010).
In addition, Mr Timis, who is the Executive Chairman of AIM-listed company African Minerals Limited (AIM: AMI) (African Minerals), has secured considerable financial support for the transactions with a combined A$160 M in new capital committed to both GFE and IPO from UK and North American institutions (with their own internal corporate governance reviews), subject to the transactions being finalised.
On 26 March 2010, ASX advised both Companies in writing that it was using its "absolute discretion" to block both transactions. This decision was taken despite:
the lawyers for IPO having discussions with ASX regarding a person such as Mr Timis (who has convictions from the 1990's and who was a director of AIM-listed Regal Petroleum plc (AIM: RPT) (Regal) which was fined for breaches of the AIM rules) holding a directorship of IPO; and being advised by ASX that the role of directors was governed by ASIC and shareholders and not the ASX listing rules;
the IPO transaction being overwhelmingly supported by shareholders at its Annual General Meeting in November 2009 pursuant to a Notice of Meeting, which was reviewed by ASX in October 2009 and deemed not to be inconsistent with its listing rules;
the Companies receiving firm commitments totalling A$160 M; and
GFE requesting that it remain in suspension from the date of its announcement (9 February 2010) and despite GFE noting to ASX its concern that its shares were continuing to trade over the last 6 weeks.
ASX stated its decision was made on the basis that it was not satisfied the Companies would comply with their continuous disclosure obligations or that they will meet the standards required of listed companies as a result of Mr Timis' influence as a substantial shareholder and director of each of the Companies.
ASX advised each of the Companies that it would not admit them to admission and quotation if the respective transactions were completed and would only reinstate the securities to quotation once the Companies announced to the market that they would not be proceeding with the transactions.
"The Board's of both companies are aware of the rumours and innuendo that surround Frank Timis. However, the Boards based their respective decisions to enter into these transactions only on the facts as presented to them," Chairman of both Companies Mr Tony Sage said.
"As for any transaction being considered on behalf of shareholders, the directors of the Companies conducted due diligence to assess the quality of the respective transactions, sought independent expert advice and, in the case of IPO, sought and was granted overwhelming shareholder support."
"If you look at Mr Timis' record over recent times for identifying projects and negotiating transactions that have delivered value to shareholders of public and private companies which he is involved with, then that is a track record that speaks for itself."
"ASX appears to have made its decision to block the GFE and IPO transactions on the basis of misleading media articles about Mr Timis and on what might happen in the future, which is extremely disappointing," Mr Sage said.
The Prospectus issued by IPO noted that Mr Timis had previously been Executive Chairman of Regal at the time when it was deemed to have breached its continuous disclosure obligations, which resulted in Regal being fined a total of £600,000. No sanction was made personally against any of the directors of Regal. Whilst Mr Timis is currently Executive Chairman of African Minerals and still holds a significant stake in Regal he no longer holds a position on the Board of Regal.
In written correspondence from the ASX, it has stated that its reason for the decisions not to admit the Companies to admission and quotation following completion of the transactions were as follows:
Mr Timis, as a major shareholder and director of the two Companies, would hold too much power and influence over the companies; and
ASX was not satisfied the two Companies would comply with the ASX listing rules including the discharge of their obligations with respect to continuous disclosure on an ongoing basis, or that they would meet the standards required of listed entities and their officers as a result of Mr Timis' influence.
"The reasons are unfounded," Mr Sage said. Mr Timis would be a non executive director and only one of 5 directors in IPO and one of 7 directors in GFE. Further Mr Timis openly offered to enter into deeds restricting voting rights on shares in the Companies he would hold or control following completion of the transactions thereby converting them into virtual "non voting" shares.
Other members of the respective Boards of IPO and GFE are directors of a number of ASX/LSE-listed companies and aware of their continuous disclosure obligations and the importance of corporate governance.
To question each Company's ability to maintain continuous disclosure is questioning the ethics and abilities of their entire team, including executive and non-executive directors, company secretaries, and other key executives - which is unfounded. Other directors of the Companies are offended at the apparent conclusion in respect of them for which ASX has no evidence or basis.
The Companies made submissions to ASX on their compliance with continuous disclosure obligations and corporate governance policies confirming that both Companies would have continuous disclosure committees (of which Mr Timis would not be a member) that would determine the need and composition of an announcement. Mr Timis would not be responsible for determining if an announcement was required or approving an announcement for release.
Decision Appealed
GFE and IPO have appealed ASX's decisions in accordance with the framework provided to them by the ASX. The Companies are reserving their rights to take legal action against ASX.
Should the Companies proceed with legal action it is likely they will be pursuing the ASX for significant damages given that the ASX has known about the IPO transaction for approximately 5 months, IPO has been funding the Kazakhstan Project since execution of the share sale agreement (totalling approximately A$5 million) and IPO and GFE had received firm commitments of A$160 million.
Both IPO and GFE have retained the services of prominent Western Australian lawyer Mr Martin Bennett in relation to the potential legal action against the ASX.
