Tullow merger with Capricorn ‘makes sense’, says Berenberg7 Jun 2022 06:08
Tullow Oil (TLW) has decided to merge with Capricorn Energy (CNE) in a deal that makes ‘strategic sense’, according to Berenberg.
Analyst James Carmichael retained his ‘buy’ recommendation and target price of 70p on Tullow Oil, which was trading up 1.8% at 54.4p on Monday afternoon.
The deal will see the companies undertake an all-share ‘merger of equals’, which Carmichael said ‘makes strategic sense, combining Capricorn’s opportunity-constrained balance sheet with Tullow’s capital-constrained asset base to accelerate organic growth opportunities in the portfolio’.
He added that annual synergies of around $50m will contribute to enhanced cashflow, and a $60m initial dividend per year.
Carmichael said he had made ‘minor changes’ to his forecasts to take into account the merger, which will see Capricorn shareholders receive 3.8068 new Tullow shares for every Capricorn share held. Tullow shareholders will retain 53% ownership on completion, expected in the fourth quarter of this year, subject to approvals.