(Adds comment from Capricorn)
By Shadia Nasralla and Svea Herbst-Bayliss
LONDON/NEW YORK, Nov 2 (Reuters) – Two other major shareholders of Capricorn Energy Plc are publicly speaking out against plans to sell the natural gas producer to NewMed Energy, arguing the deal undervalues the company’s assets , investors told Reuters.
On Wednesday, Madison Avenue Partners, which has an 8.06% stake, making it Capricorn’s second largest investor, joined small shareholders who have already voiced their disapproval.
“We oppose the transaction as it is currently structured because we believe it undervalues Capricorn,” Madison Avenue managing partner Eli Samaha told Reuters.
Kite Lake Capital Management, another top investor with a 7.39% stake held largely through derivatives, also spoke out against the deal. “The terms are unnecessarily skewed in favor of New Med,” Kite Lake co-chief investment officer Jamie Sherman told Reuters.
Capricorn said the deal “offers our shareholders a substantial return on capital, as well as continued ownership in a differentiated UK listed company shaped for the future of the energy industry.” He also said he will “in due course” set a date for the meeting at which shareholders will be allowed to vote on the proposed transaction.
Three-quarters of Capricorn shareholders must approve the deal for it to become effective.
A representative for NewMed did not immediately respond to a request for comment.
Both shareholders expressed concerns after Palliser Capital, which owns about 6.6% of Capricorn, and Irenic Capital Management, which has a 1.5% stake, came out against the proposed deal.
Growing opposition is challenging plans that could create a gas giant listed in London and Tel Aviv at a time when European countries look to these companies to help them cope with a supply shortage caused by the Russian invasion of Ukraine. The deal would create a gas producer focused on Israel and Egypt, including NewMed’s stake in Israel’s massive Leviathan offshore field.
Kite Lake argued that Capricorn could do better if he remained independent. “Capricorn, as a stand-alone entity, has a direct and executable path to immediate, near-term value creation far beyond what the New Med transaction currently offers,” the representative said.
Kite Lake also said NewMed needed the deal more than Capricorn and should therefore “pay an appropriate price to Capricorn shareholders.”
Last month, Irenic, a new company founded by Elliott Management and Indaba Capital Management alumni, argued that Capricorn and its shareholders would be better off selling the company’s assets piecemeal.
For Capricorn, this is the second time this year that shareholders have protested against its merger plans. Facing investor opposition, Capricorn ended its proposed merger with Tullow Oil Plc and switched to NewMed in Israel.
NewMed holds a 45.3% stake in the Leviathan field offshore Israel, the largest gas reservoir in the Mediterranean.
The NewMed transaction would result in the payment to Capricorn of a special dividend of $620 million. This would leave Capricorn shareholders with a 10.3% stake in the combined company, with NewMed shareholders holding 89.7%. (Reporting by Shadia Nasralla in London and Svea Herbst-Bayliss in New York Editing by Leslie Adler and Matthew Lewis)
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