Tullow Oil’s plans to merge with fellow explorer Capricorn Energy have failed, after Capricorn struck a new deal with NewMed.
Africa-focused Tullow had agreed an all-share merger in June, but some Capricorn shareholders raised concerns that it undervalued the company, and its board confirmed it was exploring alternative deals.
The deal required approval from at least 75 per cent of Capricorn shareholders.
In an announcement on Thursday, Capricorn said it was withdrawing its intention to recommend the Tullow deal to shareholders. The proposed merger with NewMed, will see Capricorn shareholders get a cash special dividend of $620 million (€640.75 million) immediately prior to the completion of the deal, valuing the company at $338 million.
Tullow will not seek to pursue the deal, the company said in a statement on Thursday evening.
Under the new agreement, Capricorn shareholders will hold about 10.3 per cent of the share capital of the combined group, with NewMed unit holders and current general partner holding 89.7 per cent.
The new group will trade under the name NewMed Energy.
“The board has engaged in a robust and dynamic process to evaluate options for Capricorn and considered a broad range of external factors and market conditions. The Combination with NewMed and a cash special dividend represent the delivery of significant value for Capricorn shareholders,” said Nicoletta Giadrossi, chair of Capricorn.
“We believe this is a compelling transaction which combines near-term value realisation with ongoing participation and value creation in a world-class gas company.”