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(Alliance News) - Tullow Oil and Capricorn Energy on Wednesday said they have agreed to an all-share merger.
Under the deal terms, Capricorn shareholders will receive 3.8068 new Tullow shares for each Tullow shares, giving Capricorn shareholders 47% of the enlarged firm.
"The boards of Tullow and Capricorn believe the combination has compelling strategic, operational and financial rationale, with the ability to deliver substantial benefits to shareholders, host nations and other stakeholders," Tullow said in the statement.
"The combination represents a unique opportunity to create a leading African energy company, listed in London, with the financial flexibility and human resource capability to access and accelerate near-term organic growth, add new reserves and resources cost-effectively, generate significant future returns for shareholders, and pursue further consolidation."
Tullow Chair Phuthuma Nhleko is expected to become chair of the combined firm, with Capricorn Chair Nicoletta Giadrossi to become senior independent director. Tullow CEO Rahul Dhir will become CEO, while Capricorn Chief Financial Officer James Smith will take on the CFO role.
The pair guided for pre-financing free cash flows of USD2.4 billion from 2022 to 2025 following the merger.
The two stocks barely reacted to the news early Wednesday. Tullow shares were down 0.1%, while Capricorn shares were unchanged.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.3% at 7,628.61
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Hang Seng: down 0.5% at 21,311.08
Nikkei 225: closed up 0.7% at 27,457.89
S&P/ASX 200: closed up 0.3% at 7,234.00
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DJIA: closed down 222.84 points, or 0.7%, at 32,990.12
S&P 500: closed down 26.09 points, or 0.6%, at 4,132.15
Nasdaq Composite: closed down 49.74 points, or 0.4%, at 12,081.39
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EUR: soft at USD1.0717 (USD1.0722)
GBP: down at USD1.2595 (USD1.2605)
USD: up at JPY129.36 (JPY128.50)
Gold: down at USD1,833.70 per ounce (USD1,845.51)
Oil (Brent): down at USD116.70 a barrel (USD123.75)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Wednesday's key economic events still to come
0955 CEST Germany manufacturing purchasing managers' index
1000 CEST EU manufacturing PMI
1100 CEST EU unemployment
0930 BST UK S&P Global-CIPS manufacturing PMI
1100 BST Ireland unemployment
0700 EDT US MBA Weekly Mortgage Applications Survey
0945 EDT US manufacturing PMI
1000 EDT US ISM manufacturing PMI
1630 EDT US API weekly statistical bulletin
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UK house prices were 11% higher in May than a year earlier, although the annual pace of growth is slowing, according to an index. Across the UK, the average property value in April had been 12% higher annually. Prices also increased by 0.9% month on month in May, taking the average house price to GBP269,914, Nationwide Building Society said. Robert Gardner, Nationwide's chief economist, said: "Demand is being supported by strong labour market conditions, where the unemployment rate has fallen towards 50-year lows, and with the number of job vacancies at a record high. At the same time, the stock of homes on the market has remained low, keeping upward pressure on house prices. We continue to expect the housing market to slow as the year progresses. Household finances are likely to remain under pressure, with inflation set to reach double digits in the coming quarters if global energy prices remain high."
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China's manufacturing sector contracted in May for the third month running, albeit at a slower pace than previously seen. Following the posting of a rise in the purchasing managers' index for China's manufacturing sector by the National Bureau of Statistics on Tuesday, an alternative PMI compiled by business magazine Caixin broadly followed suit, showing a slight rise to 48.1 points for May from 46 points in April. While the official index tends to more accurately reflect sentiment in large and state-owned enterprises, which are able to better profit from government stimulus measures, the alternative index produced by Caixin is seen as a better barometer of sentiment in medium-sized or privately-owned firms. In both indexes, however, any result below the critical 50-point mark suggests that industrial activity is expected to decline.
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Japanese manufacturers indicated that operating conditions improved at a solid rate in May, albeit not so strongly as the month before, survey results showed. The headline au Jibun Bank Japan manufacturing PMI dipped slightly to 53.3 points in May from 53.5 in April. This marked the weakest improvement in manufacturing conditions since February. The data pointed to a slight expansion in output. Growth was recorded for the third month in a row but the rate of the increase was the slowest in this period.
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BROKER RATING CHANGES
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Credit Suisse initiates Intertek with 'outperform' - target 5,250 pence
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Credit Suisse initiates PageGroup with 'underperform' - target 600 pence
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Jefferies starts BP Marsh & Partners with 'buy' - price target 380 pence
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COMPANIES - FTSE 100
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GSK has submitted to the UK Financial Conduct Authority its plan for the demerger of its consumer healthcare arm and its listing in London and New York as Haleon. The separation will take the form of a demerger of at least 80% of GSK's current 68% share of the consumer business to GSK shareholders. The remaining 32% of Consumer Healthcare currently is held by US peer Pfizer. Haleon will be listed as ordinary shares in London and as American depositary shares on the New York Stock Exchange. GSK will be a pure biopharmaceutical firm, focused on vaccines and specialty medicines. GSK said it will carry out a share consolidation following the demerger in order to keep its share price and earnings per share comparable to earlier periods. The company called a general meeting for July 6 to approve the plan.
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BHP Group confirmed it formally completed the all-share merger of its petroleum business with Woodside Petroleum, the Perth, Australia-based oil and gas company. The miner said it had paid the in specie dividend and distributed Woodside shares on Wednesday. The implied value of the in specie dividend was AUD27.2 billion, or USD19.6 billion. At this valuation, the dividend is about AUD5.38. The merger creates one of the 10 largest independent energy producers in the world. Woodside shareholders will hold 52% of the new company, while 48% will be held by BHP shareholders. The all-stock merger was first announced back in August. The two companies formally entered a share sale agreement for the merger of their oil and gas portfolios on November 22. BHP shareholders received one newly issued Woodside share for every 5.5 BHP shares they held, amounting to 914.8 million Woodside shares.
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COMPANIES - FTSE 250
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Engineering and consulting firm John Wood Group has agreed to sell its Built Environment Consulting business to WSP Global for about USD1.9 billion gross. Chief Executive Robin Watson said: "We are very pleased to have agreed this sale with WSP. This transaction will deliver significant value for our shareholders and marks a new chapter for Wood. It enables us to move onto our next strategic phase with the financial flexibility to accelerate our strategy to capture the growth opportunities ahead across both energy security and sustainability." The sale is expected to complete in the second half of 2022. John Wood said it will use the proceeds from the sale to reduce its debt and strengthen its balance sheet. The firm ended 2021 with net debt of about USD1.4 billion. It expects now to be in a net cash position.
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Footwear and clothing company Dr Martens posted annual earnings ahead of market expectations, aided by the reopening of stores as Covid restrictions eased, and has guided for continued strong sales growth. For the year ended March 31, pretax profit surged to GBP214.3 million from GBP69.7 million the year prior. Revenue rose to GBP908.3 million from GBP773.0 million. Dr Martens declared an annual dividend of 5.5 pence, compared to none the year before. "Today's strong results have been driven by our proven [direct to consumer]-first strategy and continue to build upon our track record of volume-led growth. When we listed, we committed to deliver high-teens revenue growth, and today we are pleased to report 22% constant currency growth and Ebitda ahead of market expectations," Chief Executive Kenny Wilson said. Looking to financial 2023, Dr Martens guided for revenue growth in the high-teens.
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Fellow retailer Frasers Group said it has acquired certain intellectual property of the online women's fashion retailer Missguided and Mennace - both of which have fallen into administration - for GBP20 million. "Following completion, the business will be operated by the administrator under a transitional agreement for a period of approximately eight weeks. It is then the intention that Missguided will operate as a standalone business within the group," Frasers explained.
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COMPANIES - SMALL CAP
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Bank of Ireland Group said it has completed the acquisition of Dublin-based stockbroker J&E Davy. The final price was set at EUR427 million, after adjusting for Davy's capital position on Wednesday. A quarter of the purchase price is delayed for two years. Bank of Ireland said the purchase, which was financed through existing resources, will reduce its CET1 capital ratio by 80 basis points; however, it said the deal will be accretive to earnings in the first full year of ownership. It added that Davy will "materially increase" Bank of Ireland's wealth management and fee income.
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COMPANIES - GLOBAL
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Citigroup said it completed the sale of its Australian consumer business to National Australia Bank. NAB agreed back in August to buy the business from Citigroup. The Australian consumer business includes credit cards, loans, retail banking, mortgages and wealth management solutions for high net worth individuals.
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Wednesday's shareholder meetings
Boku Inc - AGM
Parsley Box Group PLC - AGM
One Media IP Group PLC - AGM
United Oil & Gas PLC - AGM
Flowtech Fluidpower PLC - AGM
Dianomi PLC - AGM
Honeycomb Investment Trust PLC - GM re combination with Pollen Street Capital
East Imperial PLC - AGM
Secure Income REIT PLC - AGM
Public Policy Holding Co Inc - AGM
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By Tom Waite; thomaslwaite@alliancenews.com
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