Gulf Nav-Brooge acquisition: Discontent among minority shareholders about board proposals

Zawya

04-03-2025

Gulf Navigation Holding (Gulf Nav) has asked shareholders to approve a share and bond conversion price to fully acquire Brooge Petroleum and Gas Investment Company (BPGIC) from Brooge Energy Limited (BEL). The price is lower than that given by an independent valuation commissioned by the UAE's financial regulator.
Shareholders have been told the conversion price set by Gulf Nav for the issuance of bonds and shares to oil storage company Brooge Energy Limited (BEL), which owns BPGIC, is AED1.25 ($0.34). The conversion price suggested by the Securities and Commodities Authority (SCA) is AED 3, according to analyst Ziad Qaimari, who published an analysis of the transaction on X last week.
Gulf Nav's actual share price closed at AED 5.50 on Friday.
The board will ask shareholders to approve the acquisition by special resolution at its general assembly, which Qaimari said has provoked discontent among certain minority shareholders who say their holdings will be excessively diluted by the deal if it goes ahead based on the Gulf Nav valuation.
There is also shareholder concern that the board's recommendation goes directly against a valuation by the SCA, the UAE's federal financial regulatory agency, and that it takes away their freedom of choice, as they will only be asked to vote on approving the transaction subject to approving Gulf Nav's valuation over SCA's, Qaimari said.
The agenda for the assembly, due to take place on 13th March, shows approving the acquisition of BPGIC, the oil storage company owned by BEL, is a special resolution, subject to voters accepting Resolution 3 – approval of Gulf Nav's valuation.
The deal has four components, one of which is issuing AED 500 million in mandatory convertible bonds (MCBs) to current shareholders at AED 1.10 per bond. Minority shareholders will be given priority over major shareholders in the issuance.
Another part of the deal is an AED 460 million cash payment, while AED 359 million of new shares and AED 2.3 billion in convertible bonds will be issued to BEL.
The company itself has not publicly disclosed an estimated final valuation figure for the transaction.
When approached by Zawya for comment, Gulf Nav declined, but said any updates will be announced at the general assembly.
The lower conversion price will mean a higher number of bonds and shares will need to be issued to meet Gulf Nav's proposed price tags of AED 2.3 billion in bonds and AED 359 million in new shares for the proposed transaction, as set down in the general assembly invitation, Qaimari said.
This will result in the holdings of current Gulf Nav shareholders being more diluted in favour of Brooge after the transaction is completed than if the company were to proceed with the SCA valuation.
SCA rules on transactions
SCA ruled in a 2017 decision that securities holders in acquisitions shall be provided with adequate information and recommendations to be able to make a valid decision whether to accept or refuse the offer.
They should be given enough time and neutral advice, and no data that may affect their decisions may be withheld.
Nasdaq-listed BEL has seen controversy in recent years. A restructuring executive from a management consultant working on the overhaul of the company was detained in the UAE last year, but was later released.
Auditor EY is also subject to a US lawsuit from Brooge Energy shareholders regarding falsified revenues according to an FT report from December 2024.
Brooge previously paid a $5 million penalty after an investigation by the USA's Securities and Exchange Commission (SEC) regarding the matter.
(Reporting by Imogen Lillywhite; editing by Seban Scaria)