July 2 (Bloomberg) -- Roc Oil Co. investors should have an opportunity to vote on the Australian explorer’s proposal to combine with Horizon Oil Ltd., shareholder advisory firm Glass Lewis & Co. said.
Glass Lewis backs an effort by Allan Gray Australia Pty, Roc’s largest investor with about a fifth of the shares, to give shareholders a say, the San Francisco-based firm said in a June 27 report e-mailed today. It’s unfair only Horizon investors get to vote on the April agreement to create an A$800 million ($757 million) company with assets stretching from China to Malaysia, Allan Gray has said.
“In light of the significant dilutive effect of the proposed merger on shareholders’ ownership interests and the potential impact on the value of their investments, we believe Roc shareholders should be afforded the opportunity to consider the merits of the merger,” Glass Lewis said in its report.
Allan Gray said in May it wants directors to obtain shareholder approval for Roc to issue more than 30 percent of its shares. It requested a meeting, scheduled for July 11, to vote on changing Roc’s constitution to clear the way for a vote on the proposal.
Sydney-based Roc has defended the deal, saying it doesn’t require shareholder approval. Allan Gray’s proposal would place additional restrictions on Roc that other companies don’t face and breach the merger agreement, Roc said in a letter sent to investors yesterday.
“If the merger fails, Roc may not be able to find other growth opportunities at a better price,” according to the company, which received a takeover bid last month from an unidentified suitor.
Roc shareholders should have a chance to vote on the takeover offer, if it moves ahead, and the Horizon proposal, and decide on the best option, said Simon Mawhinney, a portfolio manager at Allan Gray in Sydney.
“This mystery bidder further strengthens the need to vote for this change to the constitution,” he said by phone.
A combined company would be in a better position to expand, the explorers said in April. Horizon shareholders will have 58 percent of the new company and Roc investors will have 42 percent under the deal. Horizon holders will receive 0.724 Roc shares for each share they hold.
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