By Shadia Nasralla and Sinead Cruise
LONDON -Capricorn Power ought to ditch its proposed merger with Tullow Oil, investor Palliser has stated in a letter seen by Reuters, describing it as “one-sided” and in need of “significant strategic rationale”.
“The Proposed Merger seems to us to be a poorly disguised nil-premium takeover of Capricorn by Tullow,” stated the letter which was dated Aug. 9 and signed by Palliser Capital (UK) Chief Funding Officer James Smith.
“We firmly imagine that Capricorn’s standalone worth is a minimum of 330 pence per share – representing a 50% upside to the present share value and implying that the Proposed Merger represents a worth give-away of over $500 million,” it stated.
It additionally stated the deal would harm Capricorn’s ESG profile by rising its oil-gas output ratio.
The deal would create a 100,000-barrel of oil equal per day, Africa-focused producer paid for with newly issued Tullow shares.
The brand new firm would have a greater leverage ratio of internet debt to core revenue than Tullow, permitting the mixed group to step up spending on rising output and pay an everyday dividend, ending a payout drought for Tullow shareholders.
STRATEGICREVIEW
Palliser joins traders Authorized & Normal Funding Administration and Kite Lake in criticising the deal and known as for a strategic assessment at Capricorn.
Palliser holds a stake of greater than 5% in Capricorn, Authorized & Normal IM holds round 4%, whereas hedge fund Kite Lake has pursuits value 6.7%.
Jamie Sherman, co-chief funding officer of Kite Lake, instructed Reuters he agreed with Palliser’s evaluation.
Tullow CEO Rahul Dhir stated final month no adjustments had been crucial for the merger plan, for which a prospectus is due within the fourth quarter.
Capricorn didn't instantly reply to a request for remark. Tullow declined to remark. The boards of each corporations have beneficial the deal.
Capricorn shares rose 3.6% in early buying and selling to 227.42 pence, whereas Tullow shares had been up 1.8% at 52.75 pence. A European index of oil and gasoline corporations was up 0.05%.
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