The board of Capricorn Energy has hit back at a proposal from activist shareholder Palliser Capital, stating that it is based on “outdated and incorrect facts and assumptions” about the company.
Palliser requisitioned an Extraordinary General Meeting (EGM), calling for shareholders to remove seven of the Edinburgh-based oil and gas company's directors and install six new ones.
It also opposes the proposed merger with Israel-based NewMed, which was announced in the autumn.
The board expects the EGM to take place on 1 February.
A stock exchange update from Capricorn read: “If successful, we believe it is likely that Palliser’s nominees will terminate the combination in favour of implementing the plan, which is likely to destroy value.”
The board initially pursued a transaction with Tullow Oil, capitalising on west African oil growth, but ultimately concluded that the combination with NewMed “would deliver significantly more value to shareholders by providing material upfront cash return and creating a premium MENA gas-weighted champion with superior yield, growth and energy transition benefits“.
Specifically, it stated that the merger would mean a cash return of approximately $620m, realising an approximately a 46% premium for Capricorn's remaining assets.
The statement noted that the board has reviewed Palliser's plan in detail, with independent financial advisors.
“We believe the plan is based on an overstated value of Capricorn on a standalone basis... due to Palliser’s reliance on several outdated and incorrect facts and assumptions, including being able to immediately return to shareholders approximately $620m in cash on a standalone basis, valuing the contingent value rights at over $300m and underestimating the costs and challenges associated with optimising the Egyptian fiscal terms,“ it read.
“It also does not reflect the time and costs which would be involved in executing their plan and underestimates the value creation potential of the NewMed combination.“
The update added: “Our analysis concluded that pursuing this plan would be likely to deliver less value with higher risk over a longer execution period.“
The board held more than 20 meetings with advisers and others over the last 12 months to review mergers, liquidations, breakups and potential modifications to its strategy - including 11 meetings with Palliser.
The statement noted that the Palliser plan would provide only $866m in fair market value, falling to only $645m when taking into account the trading discount.
The NewMed offer, meanwhile, values Capricorn at $920m.
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