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Alternative Investment

Tullow target Capricorn Energy looking at alternative bidders

  • Shareholder anger over Tullow Oil merger has been significant
  • Capricorn boss Simon Thompson said original deal still stood but other options being explored

Capricorn Energy (CNE) is talking to other suitors despite still backing the merger arranagement with Tullow Oil (TLW) that would see its hefty cash holdings used to cover the larger company’s sizeable debt pile. 

Last month, Tullow boss Rahul Dhir told Investors’ Chronicle the shareholder benefits to the non-cash deal were “blindingly obvious”. But there has been much frustration from Capricorn shareholders, with one saying it was a “magic bean” deal where the oil and gas company would be swapping its cash for potential returns long into the future. 

The Tullow deal equates to 190p a share for Capricorn shareholders, compared to Monday’s closing price of 233p a share. 

Now, Capricorn chief executive Simon Thompson has said other options could be on the table. 

“The board is also mindful of the impact of external factors and market conditions and is, as always, assessing all options to maximise value for shareholders,” he said. “The company is exploring a number of expressions of interest relating to alternative transactions, and is engaging with those parties expressing interest to evaluate potential outcomes.”

Thompson has so far largely left it to Tullow to make the case for the merger. 

Capricorn was sitting on a net cash position of $631mn (£545mn) as of 30 June after a payout from the Indian government. It has made significant portfolio changes already and is now focused on former Shell (SHEL) assets in Egypt. The company also completed a $500mn buyback programme earlier this year. 

The Tullow deal was expected to complete by the end of the year, although Capricorn shareholders are unlikely to back the deal in its current form. “The simple fact is, we don’t want Tullow paper,” Jamie Sherman, co-chief investment officer at Kite Lake Capital, said last month. The hedge fund holds almost a 7 per cent interest in Capricorn. 

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