Capricorn Energy has announced an adjournment of the key shareholder vote on its proposed merger with NewMed.
A requisitioned General Meeting will go ahead on 1 February, with an adjournment of the NewMed General Meeting until 22 February, "allowing a reconstituted board to assess the combination, alongside other strategic options, prior to determining the recommended route forward".
A stock exchange update explained that the board has listened to shareholder concerns about the timing of the meetings, and has therefore been considering the company’s obligations under the Business Combination Agreement entered into with NewMed on 29 September, as well as discussing with the Financial Conduct Authority about the requirements of the prospectus and circular published on 13 January.
To best enable the process of board reconstitution, the following changes have been collectively agreed:
- Nicoletta Giadrossi has accelerated her decision to step down as chair following the NewMed vote, and will step down from the board with immediate effect;
- Simon Thomson will step down as a board director with immediate effect;
- Peter Kallos, Alison Wood and Luis Araujo will also step down from the board with immediate effect;
- Keith Lough remains on the board to ensure ongoing oversight of reporting obligations and other corporate governance requirements with the intention of stepping down from the board in advance of the Requisitioned GM; and
- similarly, James Smith remains on the board as chief financial officer, with the intention of stepping down from his role as board director in advance of the meeting.
The company has been in discussions, via activist investor Palliser Capital, with the nominee directors to seek to appoint them to the board immediately, but understands that the nominee directors’ preference is to wait until the meeting on 1 February.
The continuing directors, including Cathy Krajicek and Erik B. Daugbjerg, will engage with the nominee directors to ensure an orderly transition and appropriate continuity of governance.
Earlier this month, Capricorn Energy's board hit back at a proposal from Palliser, stating that it is based on “outdated and incorrect facts and assumptions” about the company.
Palliser requisitioned an Extraordinary General Meeting, 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.
A previous 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.
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.
A second shareholder group is advising investors to oppose the deal and to support a call to oust seven directors.
Glass Lewis has joined ISS in recommending against the tie-up with the Tel Aviv-based business.
Both proxy firms back 7.45% shareholder Palliser Capital’s campaign against the deal as it feels it undervalues the company.
The Glass Lewis research said Palliser had made a “convincing case” for the rejection of the NewMed proposal and for changes to the board.
ISS has already claimed a lack of “compelling strategic rationale” in the deal.
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