Vaalco Energy Inc. is suing its largest shareholder, alleging it and another company violated securities laws in a bid to gain seats on the independent oil producer's board.
The lawsuit, filed Tuesday in the U.S. District Court for the Southern District of Texas, Houston Division, accuses New York hedge fund Nanes Delorme Partners I L.P. and Pilatus Energy SA of Zug, Switzerland, of filing misleading documents as part of an effort to install three of their nominees as Vaalco directors.
Nanes Delorme, Vaalco's biggest shareholder, urged the Houston-based company to put itself up for sale in March, saying at the time that such a deal could fetch a minimum of $7.12 per share. Vaalco shares have rallied since as investors realized the company might be in play.
The stock surged to $7.45 Wednesday, its highest point in more than a year, before closing down 16 cents to $7.19.
The lawsuit alleges that Pilatus is "acting in concert" with Nanes Delorme, and claims the companies' main motive is "is to obtain a short-term profit for themselves by forcing a quick sale of the company at prices higher than they paid." The suit identifies Pilatus as an "until-recently-hidden Vaalco investor" and a "secret partner" to Nanes Delorme.
In a filing with the Securities and Exchange Commission last week, Nanes Delorme said it owns 4.7 million Vaalco shares, or about 8 percent of the total outstanding. The filing identified Pilatus, a privately held Swiss investment company that invests in oil and gas companies, as a limited partner.
Nanes Delorme said in the filing that Pilatus bought 2.7 million Vaalco shares between Nov. 28 and Jan. 30, and contributed those shares to the fund on Feb. 14.
In a letter urging shareholders to oppose the proxy effort last week, Vaalco said Pilatus' oil and gas business is focused on West and Central Africa, an area where Vaalco has operations of its own.
Because Vaalco considers Nanes Delorme and Pilatus to be competitors, the letter said, giving them seats on the board would create "serious conflicts of interest" and "would almost certainly give them the opportunity to misuse Vaalco's confidential and proprietary information."
Nanes Delorme stepped up its lobbying efforts Wednesday by sending a letter of its own urging Vaalco shareholders to support its slate of board nominees. The letter argues that the company has "materially underperformed under this board's leadership."
The hedge fund also launched a Web site aimed at Vaalco shareholders, ImproveVaalco.com, that includes biographies of the nominees, Julien Balkany, Leonard Toboroff and Clarence Cottman III.
"Rather than provide a clear strategic plan to rebuild stockholder value, the company has chosen to evade the critical issues facing Vaalco by filing a desperate and baseless lawsuit aimed at disenfranchising stockholders and 'chilling' the democratic process," Nanes Balkany Managing Member Julien Balkany said in a statement.
Jane Simmons, a spokeswoman working on behalf of Nanes Delorme, declined to comment further. She said she had no connection to Pilatus and offered no comment on the hedge fund's involvement with the Swiss company.
A representative for Pilatus could not immediately be reached for comment.
Terms & Conditions
RSS Headlines
Fool UK