UK’s Capricorn to merge with Israel’s NewMed instead of Tullow

Israel’s NewMed Energy, formerly known as Delek Drilling, has entered into a merger agreement with the UK-based Capricorn Energy, previously known as Cairn Energy. The deal will see Capricorn withdraw its previous plans to combine with Tullow Oil.

NewMed Energy - Capricorn
Source: NewMed Energy

NewMed says the merger with Capricorn will create a “leading East Mediterranean energy company” and Capricorn says it will create a “MENA gas and energy champion and one of the largest upstream energy independents listed in London.”

In a statement on Thursday, Capricorn said that a cash special dividend of $620 million is proposed to be paid to existing Capricorn shareholders immediately prior to the completion of the combination.

The combination will result in Capricorn shareholders holding approximately 10.3 per cent of the share capital of the combined group and NewMed unitholders, together with NewMed’s current general partner, holding in aggregate approximately 89.7 per cent of the share capital of the combined group at the completion of the combination.

The combined group will trade under the name NewMed Energy and expects to retain its existing Premium Listing on the London Stock Exchange (LSE). It intends to implement a listing of its entire issued share capital on the Tel Aviv Stock Exchange (TASE) to take effect on or as soon as possible after the completion of the combination.

The board of directors of Capricorn believes that the transaction is in the best interests of Capricorn shareholders and intends to recommend unanimously that they vote in favour of the resolutions to be proposed by Capricorn at the shareholder meeting to be held to approve the transaction.

Accordingly, the Capricorn board has unanimously decided to withdraw its intention to recommend the Tullow combination, which was announced back in June 2022.

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Whilst it is currently proposed for Simon Thomson, the CEO of Capricorn, to become the transitional Chair of the combined company, to provide continuity through the combination process, a search for an independent Chair will be undertaken.

As well as the Chair, the board of the combined group will comprise Yossi Abu as CEO, James Smith as CFO, and 7 Non-executive Directors, with 2 expected to be representatives of the Delek Group and 5 expected to be independent non-executive directors (2 of which will come from the existing Capricorn board).

Simon Thomson, Chief Executive of Capricorn, said: “This transaction delivers our shareholders a substantial capital return, together with an ongoing stake in a differentiated UK listed company, shaped for the future of the energy industry.

“The combined business will offer investors a gas business of scale, with the prospect of near-term growth, a dependable capital returns policy, and a compelling ESG narrative to support the energy-hungry markets of the Middle East, North Africa and Europe.”

The completion of the transaction, subject to approvals and conditions, is expected in 1Q 2023.

As recently reported, NewMed is one of Chevron’s partners in the Aphrodite gas field offshore Cyprus and the partnership has moved forward with the development of the field reservoir.

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The partnership believes the field has the potential to have the same transformative effect on Cyprus as Tamar and Leviathan had on Israel, in terms of national energy independence, significant revenues for the state, and material environmental improvements.