Capricorn Energy's move to ask shareholders for permission to bolster its options for payouts could pave the way for an alternative to its planned merger with NewMed, top-three Capricorn shareholder Palliser told Reuters.
Palliser is one of a chorus of Capricorn investors opposed to a planned merger with NewMed which would create an Israel-Egypt-focused gas producer at a time when Europe is looking for non-Russian gas, but which they say undervalues Capricorn.
Capricorn on Monday called a shareholder meeting for Dec. 15 to get the green light for an accounting move that would give it the option to distribute $495 million, in addition to a $620 million special dividend as part of the NewMed deal.
James Smith, chief investment officer at Palliser Capital, told Reuters he believed 40% of Capricorn shareholders shared his opposition to the NewMed deal in its current form.
Palliser has said Capricorn shareholders could get more value than the NewMed deal from Capricorn paying more dividends, cutting costs and optimising its Egyptian assets.
"We believe that Capricorn's announcement ... to increase distributable reserves well beyond the level required for the NewMed transaction could instead facilitate the ... plan we outlined on Oct. 27, thereby catalysing a superior return at meaningfully lower risk for Capricorn shareholders," he said.
In October, Palliser said Capricorn could be valued at 315 pence per share, "a 27% upside to the implied value of the NewMed transaction". Capricorn's shares are currently trading at around 251 pence.
Palliser turned its derivative-based investment into shares this week, becoming Capricorn's third-biggest shareholder with just under a 7% stake, according to Refinitiv Eikon data, and with the power to call extraordinary shareholder meetings. NewMed holds a 45.3% stake in the Leviathan field off the coast of Israel, the largest gas reservoir in the Mediterranean. If the merger goes through, Capricorn shareholders would be left with a 10.3% stake in the combined company.
For Capricorn this marks the second time this year that shareholders have protested against its merger plans. Facing investor opposition, Capricorn terminated plans to merge with Tullow Oil and moved on to NewMed instead. Capricorn declined to comment. NewMed had no immediate comment.
(Reuters - Reporting by Shadia Nasralla/Editing by Mark Potter)