Capricorn Energy Proposed Combination Partnership with NewMed Energy Limited

Source: 9/29/2022, Location: Middle East

Capricorn and NewMed are pleased to announce a proposed combination (the “Combination”), to create a MENA gas and energy champion and one of the largest upstream energy independents listed in London (the “Combined Group”). A cash special dividend of $620 million is proposed to be paid to existing Capricorn shareholders (the “Capricorn Shareholders”) (and relevant share scheme participants) immediately prior to the completion of the Combination (together, the “Transaction”).

The Combination will be effected by Capricorn acquiring all of the partnership interests in NewMed in consideration for the issue of new Capricorn shares to NewMed unitholders (the “New Capricorn Shares”) based on an exchange ratio of 2.337344 New Capricorn Shares for every NewMed participation unit (a “Unit”).

The Combination will result in Capricorn shareholders holding approximately 10.3 per cent of the share capital of the Combined Group and NewMed unitholders, together with NewMed’s current general partner, holding in aggregate approximately 89.7 per cent of the share capital of the Combined Group at completion of the Combination. The Combined Group will trade under the name NewMed Energy and expects to retain its existing Premium Listing on the London Stock Exchange (“LSE”). It intends to implement a listing of its entire issued share capital on the Tel Aviv Stock Exchange (“TASE”) to take effect on or as soon as possible after Completion of the Combination. It is expected that UK FTSE indexation will also be maintained.

Under the terms of the Transaction, Capricorn Shareholders will receive a cash special dividend expected to be $620 million, equivalent to £1.72/share1 , 2 immediately prior to Completion of the Combination.

The Combination exchange ratio values Capricorn, on an ex-dividend basis, at $338 million or £0.99/share3, a 46 per cent premium to the theoretical ex-dividend price on 28 September 2022 (being the last business day prior to the date of this announcement).

The expected total value of the Transaction to existing Capricorn Shareholders is therefore equivalent to 271 pence per Capricorn Share. This represents a premium of:
- 13 per cent. to the closing price of 240 pence per Capricorn Share on 28 September 2022 (being the last business day prior to the date of this announcement); and
- 36 per cent to the closing price of 199 pence per Capricorn Share on 31 May 2022 (being the last business day prior to the date of the previously announced Tullow Combination).

The board of directors of Capricorn (the “Capricorn Board”) believes that the Transaction is in the best interests of Capricorn Shareholders and intends to recommend unanimously that Capricorn Shareholders vote in favour of the resolutions to be proposed by Capricorn at the shareholder meeting to be held to approve the Transaction. Accordingly, the Capricorn Board has unanimously decided to withdraw its intention to recommend the Tullow Combination.

The board of directors of NewMed (the “NewMed Board”) has confirmed its intention to recommend unanimously that NewMed unitholders vote in favour of the resolutions to approve the Combination. Delek Group, NewMed’s principal unitholder, which holds voting interests in c.54% of NewMed’s Units, has entered into an irrevocable commitment to vote its Units in favour of the Combination.

The Board of the Combined Group will have a clearly defined governance structure in line with the UK Corporate Governance Code. Whilst it is currently proposed Simon Thomson, the CEO of Capricorn, will become the transitional Chair of the Combined Group, to provide continuity through the Combination process, a search for an independent Chair will be undertaken and it is intended all UK corporate governance principles will be complied with in due course.

As well as the Chair, the Board of the Combined Group will comprise Yossi Abu as CEO, James Smith as CFO and 7 Non-executive Directors, with 2 expected to be representatives of the Delek Group and 5 expected to be independent non-executive directors (2 of which will come from the existing Capricorn Board). Accordingly, a majority of the directors of the Board of the Combined Group, excluding the Chair, will be independent.

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