Capricorn Energy has scrapped its merger with rival Tullow Oil in favour of a combination with Israeli natural gas group NewMed Energy.
The announcement comes weeks after Tullow said it remained “fully committed” to the $1.4bn merger despite Capricorn, formerly known as Cairn Energy, saying it was seeking alternatives following shareholder opposition to the deal.
London-listed Capricorn and NewMed, which holds a 45.3 per cent working interest in the Leviathan field in the Mediterranean, on Thursday announced a “binding business combination agreement” to “create a MENA gas and energy champion and one of the largest upstream energy independents listed in London”.
Under the deal, NewMed unit holders will receive 2.337344 new Capricorn shares for each of their existing units. Capricorn shareholders will hold about 10.3 per cent of the combined entity, with NewMed unit holders, along with the partnership’s current general partner, holding the rest.
Capricorn shareholders will also receive a cash special dividend, expected to be $620mn, prior to the combination, both companies said.
The board of directors of Capricorn said it believed the merger with NewMed was “is in the best interests of Capricorn shareholders and intends to recommend unanimously that Capricorn shareholders vote in favour” of the deal.
Simon Thomson, chief executive of Capricorn, said 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 said they expected to retain Capricorn’s listing on the London Stock Exchange but trade under NewMed Energy. They added that they also intended to list on the Tel Aviv Stock Exchange.
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