Capricorn Energy has scrapped the Scottish-headquartered firm's contentious merger with Israeli gas group NewMed following months of pressure from investors that toppled Capricorn's leadership.
The shareholder revolt led by Palliser Capital forced the exit last month of seven Capricorn directors including chief executive Simon Thomson. They were replaced on February 1 by six fresh appointees who undertook a review of the proposed transaction as an "immediate priority".
"Based on its work to date in respect of the strategic review and taking into consideration the views expressed by shareholders on the NewMed transaction, the board has resolved to advise shareholders to vote against the NewMed transaction," Capricorn said in a statement issued yesterday.
"This action is necessary to enable the consideration of all potential strategic options for the company, including the material return of capital to shareholders and potential engagement with respect to alternative options."
In response, NewMed said yesterday that it has dropped the plan and that both sides have agreed to terminate the deal.
READ MORE: NewMed merger 'significantly' less likely as Capricorn caves in
The agreement was announced in September of last year, replacing a proposed transaction with Tullow Oil that was also opposed by many shareholders.
The battle over the company's future was set to come to a head on February 1 when a vote was due on both the merger and on Palliser's proposal to remove seven of Capricorn's nine directors and replace them with the hedge fund's own nominees. Palliser claimed its plan had support from investors controlling roughly 40 per cent of Capricorn's issued share capital.
The board of Edinburgh-based Capricorn conceded defeat on January 24 with the immediate resignation of five directors, including Mr Thomson, and two others that followed shortly thereafter. The vote on the NewMed merger was postponed to February 22, while the meeting called by Palliser to confirm its nominees went ahead on February 1.
Capricorn's management team is now headed by interim chief executive Chris Cox, the former CEO of Spirit Energy who has also held senior roles with Centrica, BG Group, Amerada Hess and Chevron. He is supported by non-executive chairman Craig van der Laan, who has nearly three decades of senior international legal experience across a wide range of industries.
READ MORE: NewMed merger cynics question 'intransigence' of Capricorn directors
Other board members joining on February 1 included Maria Gordon, Richard Herbert, Hesham Mekawi, and Tom Pitts. Two previous directors remained in place – Catherine Krajicek and Erik Daugbjerg.
"In conducting the strategic review, the board is mindful of the overwhelming mandate it has been given by shareholders and, in that context, the views that proxy advisory agencies and a significant number of shareholders have expressed in relation to the NewMed transaction, including their unwillingness to support it on its current terms," Capricorn said yesterday.
"An immediate priority has therefore been to review the board's position towards the NewMed transaction."
The vote on the NewMed deal planned for February 22 will no longer take place, with Capricorn instead confirming that it will issue its year-end results on April 27. A trading update ahead of those results will be issued "shortly".
READ MORE: Another blow for Capricorn-NewMed merger plans
Under the agreement with NewMed, Capricorn would have paid out a $620m special dividend to its shareholders immediately prior to the merger, financed mainly by a payment from the Indian government following the settlement of a long-running tax dispute. Capricorn's previous management team had insisted the dividend would have to be cut to around $500m without the NewMed deal.
Formerly known as Cairn Energy, Capricorn agreed the deal with NewMed at the end of September, scrapping the board's previously recommended merger with Tullow Oil in the process. In addition to the $620m special dividend, Capricorn's investors would have also received a 10.3% stake in the enlarged NewMed, which at that time valued the Scottish company at 271p per share.
Campaigners against the merger said this under-valued the business, with accusations of "intransigence" and "brazen disregard" as the dispute intensified. Shares in Capricorn closed yesterday's trading 2.4p lower at 246.6p.
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