The valuation from ERCE represents a 29% upside to Capricorn Energy’s closing share price on 25 October 2022 and is also a 27% upside to the implied value of the transaction with NewMed Energy
Palliser Capital, which holds a stake of around 6.6% in Capricorn Energy, has expressed its opposition to the latter’s recently announced merger deal with Israeli firm NewMed Energy (formerly Delek Drilling), citing material valuation concerns.
The London-based investment firm is said to be one of the largest investors of Capricorn Energy.
Palliser Capital stated that it is disappointed that the UK-based oil and gas firm has “pivoted to another one-sided” transaction which similarly does not match its intrinsic value.
In August 2022, Palliser Capital asked Capricorn Energy to abandon its previously announced £657m merger deal with Tullow Oil. The deal was cancelled following the agreement with NewMed Energy in September 2022.
Palliser Capital claimed that it was after a months-long engagement with Capricorn Energy’s board and senior management personnel that the Tullow Oil agreement was scrapped, which was supported by other large shareholders.
According to Palliser Capital, a report from oil and gas consultancy ERCE values Capricorn Energy at $1.13bn, which is 315p per share.
The ERCE valuation represents a 29% upside to the oil and gas firm’s closing share price on 25 October 2022. Furthermore, it is a 27% upside to the implied value of the transaction with NewMed Energy, said Palliser Capital.
As per the terms of the deal, Capricorn Energy is valued on an ex-dividend basis at $338m or £0.99 per share. The company’s shareholders are proposed to be paid $620m, equivalent to £1.72 per share, as a cash special dividend.
In a statement, Palliser Capital, said: “Palliser urges Capricorn to recognise that it need not be a forced seller; if Capricorn cannot find a superior deal—one at fair value in a short and defined timeframe—then the Company should stop wasting further shareholder resources and instead follow the proposed Value Optimisation Plan.
“Palliser believes this would unlock Capricorn’s intrinsic value of 315 pence per share in the near term and up to 400 pence per share over the medium term, resulting in a far better outcome for Capricorn shareholders than the Proposed Merger and the liquidation value yardstick.”
Through the merger with Capricorn Energy, NewMed Energy intends to create a gas and energy major in the Middle East and North Africa (MENA) region.