Metgasco’s latest crisis: Director ousted for alleged breach of duties
When Andrew Purcell is asked how serious a breach of directors' duties it would be for a director to seek a secret, personal benefit in return for supporting a deal in the interest of shareholders, he answers with a vigorous nod.
"That would be against directors' duties, yes," he agrees.
That conduct is precisely what Mr Purcell, who this week was voted off the board of the ASX-listed oil and gas venture Metgasco, has been accused of by the chairman of the company which ousted him — an allegation he flatly denies.
Behind the accusation is the failure of a planned merger between Metgasco and another small oil and gas company, Byron Energy.
Fellow directors were shocked when Mr Purcell did an about-face after initially backing the merger, which would have delivered enormous value for Metgasco shareholders.
The shock turned to outrage, said Metgasco chairman Alex Lang, when the board was told Mr Purcell had approached Byron Energy, in breach of board protocols, with an ultimatum.
Expectation of being appointed CEO
"The CEO of the target company [Byron] disclosed, or reported to me, that Purcell was seeking a very personal benefit in return for his support," Mr Lang told the ABC.
"Andrew Purcell expressed towards the chief executive of Byron Energy that he expected to be made CEO of the merged entity, when the merger was successful, in return for his support for the deal on the Metgasco board."
When the ABC put the allegation to him, Mr Purcell responded: "I said no such thing."
"We got to the point of due diligence and there's a number of questions I had, as if with any transaction, that should be answered," he said.
"Those questions had not been answered."
The proposed merger required unanimous director support to proceed and Purcell's opposition effectively scuppered the deal.
He agreed in hindsight it would have been in Metgasco shareholders' best interests — Byron Energy's value has since soared — but said he was acting on the best information he had at the time.
The CEO of Byron Energy, Maynard Smith, declined to be interviewed or to make any comment on the issue, but did not dispute Metgasco chairman Mr Lang's version of events.
It's not the first time Andrew Purcell has been at the centre of a boardroom battle.
When fellow directors succeeded in having him dumped from the Metgasco board this week, it was the third time in recent years he had either resigned amid controversy or been evicted from a company board.
Mr Purcell maintains he is a stalwart champion of all shareholders in the companies he is or has been a director of and brings to those businesses extensive experience in the oil and gas industry, as well as investment banking.
"I have many investors and many shareholders across all the companies I sit on the boards of," he said.
"I look after each of them as if they were my only one and I look after all shareholders the same way."
But others dispute this.
Directors at some companies Mr Purcell's been involved with have told the ABC of their unease about transactions he's brought to the table or deals that might potentially benefit associates.
Some of the concerns relate to his relationship with the Twinkle Group: a network of companies apparently controlled by Malaysian interests via an opaque structure that flows through the British Virgin Islands.
In early 2013, after a board spill, Mr Purcell became a director of Cougar Energy, later renamed Moreton Resources, an ASX-listed company based in Brisbane with coal assets in Queensland.
Jason Elks, who is now the executive chairman of Moreton Resources, owned more than 5 per cent of the company's shares at the time.
He was initially impressed by Mr Purcell's pitch.
"Cougar had quite significant coal assets that were under-utilised and undervalued," Mr Elks said.
"The mandate was that they were going to advance the coal assets.
"I was looking to him, being a coal expert, to advance the company."
But he soon became disillusioned.
Driven to near insolvency
"It was very odd. What they did was started to downgrade the coal assets.
"I was concerned that they were far more valuable than they were making out.
"Over six months [they] managed to pretty much destroy the intrinsic value on the share market so the price dropped significantly."
Within months, the board reckoned the company was near insolvency.
Andrew Purcell came up with a solution: he introduced Twinkle Woods Limited as a source of funding.
Moreton struck a deal that offered Twinkle Woods Limited effective control of the company — a stake of at least 35.5 per cent through shares and convertible notes — in return for a $1 million loan.
Jason Elks was alarmed; he saw this as a virtual giveaway.
"They purported that the company was in dire straits when we had receivables of $8-10 million."
"They would have had … under their control tens of millions of dollars of coal assets, they would have had accounts and receivables due to them of somewhere between $8-10 million in cash, all for the princely sum of $1 million."
Mr Elks said he met Mr Purcell to alert the board to significant sums of money the company could access.
He pointed to cash in the bank; an electricity bond worth nearly $1 million, for a former unconventional gas project, which Moreton could recoup with a simple letter to Ergon Energy; to research and development grants worth $3-5 million (which were later realised for $7 million).
They didn't have $10 million in cash and receivables," Mr Purcell said.
"Later on, about a year later, they got the R&D grant but at the time it was borderline."
Takeovers Panel gets involved
When he was rebuffed, Mr Elks took his concerns to the Takeovers Panel, which assesses disputes about control of companies.
It was highly critical of the Twinkle Woods deal.
"The identities of the beneficial owners of Twinkle Woods had not been disclosed to shareholders," the panel said.
"We consider that this information should have been disclosed."
Moreton's claim that the transaction did not amount to a transfer of control to Twinkle Woods was rejected by the panel, which expressed concern about evidence that Twinkle Woods' stake might be transferred to an undisclosed third party.
The Takeovers Panel also said a break fee of $250,000 on Twinkle's $1 million loan, "was likely to substantially coerce shareholders into approving the issue of convertible notes to Twinkle Woods" and was unacceptable.
Mr Purcell flatly denies he was acting in concert with Twinkle Woods.
"I had nothing to do with that transaction," he said.
"The company was underwater financially, on the brink of going insolvent. I introduced a source of capital to [the] then CEO; they put a transaction together."
Faced with the Takeovers Panel's view, the company dropped the deal with Twinkle Woods and paid back the loan — with interest but minus the break fee.
'No idea' who's behind Twinkle Group
Twinkle has since become a significant source of funding for Mr Purcell's business endeavours.
In 2016, when a company associated with Mr Purcell bought a large stake in Metgasco, Twinkle Capital was initially disclosed as an associated entity.
On March 29 last year, Twinkle Capital loaned Mr Purcell's M&A Advisory, which has a 19 per cent stake in Metgasco, $1.8 million.
It told the market it was, at that time, no longer an associate of Mr Purcell's company.
Mr Purcell said: "The Twinkle Group and who's behind it, I have no idea.
"I know one director; not a stalking horse, [he's] a financial investor. He earns an interest rate.
"People with a lot of money like people they trust, and I'm one of those people, thankfully."