Capricorn Energy (Capricorn) has dramatically ditched its proposed merger with rival Tullow Oil (Tullow), instead reaching an agreement with Israeli gas group New Med Energy (New Med).
The London-listed company revealed it had secured a binding agreement with New Med to “create a MENA (Middle East and North Africa) gas and energy champion and one of the largest upstream energy independents listed in London.”
Earlier this month, Tullow said it was “fully committed” to the $1.4bn merger despite Capricorn seeking alternatives following shareholder opposition to the deal.
Under the terms of the new deal, Capricorn shareholders will receive a cash special dividend worth $620,, equivalent to £1.72 per share
Meanwhile, New Med unit holders will receive 2.34 new Capricorn shares for each of their existing units.
Capricorn shareholders will hold about 10.3 per cent of the combined entity.
New Med unit holders, along with the partnership’s general partner, will hold the rest.
Capricorn’s board of directors believe the new deal is in the best interests of shareholders and intends to recommend they unanimously back the merger at a later shareholder meeting to approve the transaction.
New Med holds a 45.3 per cent working interest in the Leviathan field in the Mediterranean, and the combined group will create a diversified exploration portfolio across Cyprus, Egypt, Israel, UK, Mexico, Mauritania and Suriname.
Simon Thomson, chief executive of Capricorn, argued the transaction “delivers our shareholders a substantial capital return, together with an ongoing stake in a differentiated UK-listed company, shaped for the future of the energy industry”.
The companies expected to retain Capricorn’s FTSE 250 listing on the London Stock Exchange but trade under New Med Energy.
Shares in the company are currently up 4.2 per cent on Thursday afternoon following the announced deal.
They also intend to list on the Tel Aviv Stock Exchange.