Tullow Oil to buy Capricorn Energy in all-share deal

(Sharecast News) - Tullow Oil said on Wednesday that it has agreed to buy Capricorn Energy in an all-share deal.

Under the terms of the transaction, Capricorn shareholders will be entitled to receive 3.8068 new Tullow shares for each of their shares. Capricorn shareholders will own 47% of the combined group, while Tullow holders will own the rest.

Tullow said the merger will create "a leading African energy company with a material and diversified asset base and a portfolio of investment opportunities delivering visible production growth".

The combined group is expected to realise pre-tax net cash cost synergies of $50m per year.

Tullow chief executive Rahul Dhir said: "Our two companies are a perfect fit and this combination draws on the proud heritage of both Tullow and Capricorn to create a leading African energy company.

"With renewed focus and ambition, the combined group will have the financial flexibility to accelerate organic growth and pursue further opportunities as they arise, while creating value for shareholders and host countries alike. Together, we are committed to building a better future through responsible energy development."

Russ Mould, investment director at AJ Bell, said: "A merger of equals between oil and gas firms Capricorn Energy and Tullow Oil reflects how far both have fallen since their glory days - when they were both propelled by exploration success to the ranks of the FTSE 100.

"Even as a combined entity they are a long way short of that today but given Tullow's very existence seemed under threat at one stage and Capricorn was hamstrung by a dispute with India over tax, shareholders in both companies will hope the tie-up can lay the foundations for renewed growth.

"The deal takes place against the backdrop of a big fall in the oil price amid speculation OPEC might end its affiliation with Russia as a precursor to increasing production."