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LONDON/NEW YORK, Nov 2 (Reuters) -
Four additional top shareholders in Capricorn Energy Plc are speaking out publicly against the natural gas producer's planned sale to NewMed Energy, 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, which owns a 7.39% stake largely through derivatives, Newtyn Management, which has a 6.05% stake and Legal & General Group, which holds nearly 4%, also told Reuters on Wednesday that they oppose the deal.
"The terms are unnecessarily biased in the favor of New Med," Kite Lake's co-chief investment officer, Jamie Sherman, said.
"We are not convinced that this proposal is the best path forward to maximize shareholder value and minimize future environmental risks," said Nick Stansbury, head of climate solutions at Legal & General.
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.
Several investors said there is now a reasonably good chance for them to block the deal.
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.
A representative for NewMed did not immediately respond to a request for comment.
The 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.
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 and moved on to Israel's NewMed instead.
"We are pleased that the proposed combination with Tullow has been abandoned, and the new proposal does address some, but not all, of our prior concerns," Legal & General's Stansbury said.
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, Matthew Lewis and Diane Craft)
