Capricorn shareholders Madison Ave, Kite Lake speak out against NewMed deal (updated)

1CM

02/11/2022 20:36

(Adds comment from Capricorn)
    By Shadia Nasralla and Svea Herbst-Bayliss
       LONDON/NEW YORK, Nov 2 (Reuters) - Two additional top
shareholders in Capricorn Energy Plc  CNE.L  are speaking out
publicly against the natural gas producer's planned sale to
NewMed Energy  NWMDp.TA , arguing the deal undervalues the
company's assets, the investors told Reuters.
    On Wednesday, Madison Avenue Partners, which owns an 8.06%
stake, making it Capricorn's second-largest investor, joined
smaller shareholders who have already registered their
disapproval.
    "We are opposed to the transaction as currently structured
as we believe it undervalues Capricorn," Eli Samaha, managing
partner at Madison Avenue, told Reuters.
    Kite Lake Capital Management, another prominent investor
with a 7.39% stake owned largely through derivatives, also spoke
out against the deal. "The terms are unnecessarily biased in the
favor of New Med," Kite Lake's co-chief investment officer,
Jamie Sherman, told Reuters.
    Capricorn said the deal "delivers our shareholders a
substantial capital return, along with an ongoing stake in a
differentiated UK listed company, shaped for the future of the
energy industry." It also said that it will "in due course" set
a date for the meeting when shareholders will be allowed to vote
on the proposed transaction.
    Three-quarters of Capricorn's shareholders need to approve
the deal for it to become effective.
    A representatives for NewMed did not immediately respond to
a request for comment.
    The two shareholders expressed concerns after Palliser
Capital, which owns roughly 6.6% of Capricorn, and Irenic
Capital Management, which owns a 1.5% stake, spoke out against
the proposed deal.
    The mounting opposition is challenging plans that could
create a London- and Tel Aviv-listed gas giant at a time
European countries are looking to such companies for help with a
supply crunch caused by Russia's invasion of Ukraine. The deal
would create an Israel-Egypt-focused gas producer including
NewMed's stake in Israel's massive Leviathan offshore field. 
    Kite Lake argued that Capricorn could do better if it
remained independent. "Capricorn, as a standalone entity, has a
direct and executable path towards immediate short-term value
creation in substantial excess of what the New Med transaction
currently offers," the representative said.
    Kite Lake also said NewMed needs the deal more than
Capricorn does and should therefore "pay an appropriate price to
Capricorn shareholders."
    Last month Irenic, a new firm 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 marks the second time this year that
shareholders have protested its merger plans. Facing investor
opposition, Capricorn terminated plans to merge with Tullow Oil
Plc  TLW.L  and moved on to Israel's NewMed instead.
    NewMed holds a 45.3% stake in the Leviathan field off the
coast of Israel, the largest gas reservoir in the Mediterranean.
    The NewMed transaction would result in Capricorn's being
paid a $620 million special dividend. It would leave Capricorn
shareholders with a 10.3% stake in the combined company, with
NewMed shareholders owning 89.7%. 
 (Reporting by Shadia Nasralla in London and Svea Herbst-Bayliss
in New York
Editing by Leslie Adler and Matthew Lewis)
 ((svea.herbst@thomsonreuters.com; +617 856 4331; Reuters
Messaging: svea.herbst.thomsonreuters.com@reuters.net))