Genel Energy raised to US$436 million its cash bid for Capricorn Energy surpassed the proposal submitted by Norway’s DNO and regained the support of the British company’s board of directors.
The new proposal intensifies a competition that has been ongoing for several months surrounding Capricorn and its exploration and production assets in Egypt. Interest is particularly focused on its presence in the Western Desert, a crucial region for the company’s upstream operations.
Genel Energy improves the conditions for acquiring Capricorn
Under the revised terms of the transaction, Capricorn shareholders would receive around US$5.74 per share the figure combines US$4.75 cash with a special dividend of US$0.99 per title under these conditions, the offer represents a premium close to 10% in response to the proposal of US$396 million previously submitted by DNO.
Competition began to intensify after Genel secured initial backing from Capricorn’s board in July with an offer valued at US$360 million later on, DNO he submitted a superior proposal and succeeded in getting the council to change its recommendation.
Now, the increase to US$436 million once again positions Genel as the most economically valuable proposal in the bidding.
Upstream assets in Egypt promote competition
Interest in Capricorn is closely related to their exploration and production operations in Egypt its assets in the Western Desert offer potential buyers an opportunity to expand their exposure to the country’s oil and gas sector. The addition of Capricorn would also allow Genel to diversify its production base and expand its drilling program.
Daniel Slater, an analyst at Zeus Capital, noted that the deal would provide Genel with a considerably more diversified production base, along with a broader drilling program and new sources of cash flow.
The acquisition would also strengthen Egypt’s weight within Genel’s portfolio, in a context where exploration and production companies are looking for assets capable of delivering production and generating cash flow.
Capricorn recovers stock market levels of 15 years ago
As the corporate dispute progressed, the market reacted strongly to the new proposal, with Capricorn shares rising by more than a 12% until it was located around 443 pence a level the company hadn’t seen in over 15 years. In contrast, Genel’s shares fell by nearly a 2% during the day.
The market reaction reflects the improved economic conditions offered to Capricorn shareholders and keeps attention focused on the possibility that competition between Genel and DNO will continue while the company’s future is being defined.
Capricorn’s council once again backs Genel
After learning of the improved offer, Capricorn board of directors withdrew its favorable recommendation to DNO and once again endorsed Genel’s proposal.
The board believes that the new conditions offer shareholders greater value and better guarantees in terms of certainty and execution of the transaction.
In addition, Genel has secured commitments from shareholders including Palliser Capital, Newtyn Management, Kite Lake Capital and Madison Avenue Partners.
Taken together, these commitments represent approximately 39% of Capricorn’s issued share capital, which gives Genel significant backing within the company’s shareholding structure.
DNO, for its part, did not indicate whether it would submit a new proposal when asked about the possibility of improving its offer. Attention now turns to the Norwegian company’s next moves and the process for finalizing the acquisition of Capricorn.
Source: Reuters
Photo: Shutterstock
