Capricorn shareholder opposes $1.4 Billion Tullow merger

• Capricorn Energy’s proposed merger with Tullow Oil criticized as a “rights issue in disguise”.
• Hedge fund Kite Lake, which holds a 4.6% stake in Capricorn,
• Criticizes the transaction alongside Legal and General Investment Management (LGIM).

Capricorn Energy’s proposed merger with rival oil and gas firm Tullow Oil has been criticized by a second major shareholder as a “rights issue in disguise.”

Kite Lake, a hedge fund, stated that the anticipated $1.4 billion merger would solve a problem that only existed for investors in debt-ridden Tullow.

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“It is nothing more than a rights issue in disguise for Tullow, and we believe the only benefit of this deal is that it has reminded the market that the underlying value of Capricorn far exceeds any value offered in the proposed Tullow combination,” said Jamie Sherman, co-chief investment officer at Kite Lake.

The hedge fund, which holds a 4.6% stake in Capricorn, criticizes the transaction alongside Legal and General Investment Management (LGIM).

According to the terms of the acquisition, Capricorn shareholders would get 3.8 new Tullow shares for every existing share. Tullow shareholders would own 53% of the combined business, while Capricorn owners would possess the remaining 47%.

LGIM, the largest asset management in the United Kingdom, told the Financial Times earlier this month that the deal had a “clear strategic reason.” Additionally, it was stated that the acquisition would boost “financial leverage and the likelihood of the merged firm increasing oil production over time, potentially in higher expensive basins.”

Capricorn asserts that the transaction will create a premier London-listed energy group focused on Africa, with holdings in Egypt, Ghana, Gabon, Côte d’Ivoire, and Kenya, with daily output of 100,000 barrels.

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But the partnership will also provide Tullow, whose net debt at the end of 2021 was $2.1 billion, with access to Capricorn’s capital.