Capricorn shareholder Palliser seeks to oust directors

Edinburgh-based Capricorn Energy announced that its third-biggest shareholder Palliser Capital has called for a general meeting of the firm to set a vote on removing seven Capricorn directors including CEO Simon Thomson.

Palliser is one of a number of Capricorn investors opposed to a planned merger of the Scottish oil and gas firm with Israel’s NewMed Energy, arguing that it undervalues Capricorn, which was formerly known as Cairn Energy.

Capricorn has received a requisition notice requiring that the board of directors convenes a general meeting of shareholders for the purposes of considering and, if thought fit, approving resolutions to: (i) remove Simon Thomson, James Smith, Nicoletta Giadrossi, Peter Kallos, Keith Lough, Luis Araujo and Alison Wood from the board and (ii) appoint six new proposed candidates to the board,” said Capricorn Energy.

“The requisition notice has been delivered by Palliser Capital Master Fund Ltd, which currently holds approximately 6.9% of the company’s voting share capital. 

“The board is considering the content and legality of the requisition notice and will make further announcements regarding the requisition notice in due course.

The board unanimously reaffirms its support for each of its directors identified in the requisition notice and fundamentally rejects that the proposed resolutions are in the best interests of shareholders. 

“The board urges all shareholders not to give any commitments to Palliser if they are approached regarding the resolutions proposed in the requisition notice.”

Capricorn shareholders who have publicly opposed the planned deal with NewMed include Palliser, Madison Avenue, Kite Lake, Newtyn Management, and Legal and General Investment Management, representing around 32% of Capricorn’s shares, according to Reuters.

In September, Capricorn scrapped a plan to merge with Tullow Oil after investors voiced opposition.

Capricorn withdrew its intention to recommend an all-share merger with Tullow Oil and said instead it would recommend to shareholders that Capricorn combine with NewMed Energy.

A cash special dividend of $620 million is proposed to be paid to existing Capricorn shareholders immediately prior to the completion of the deal.

The deal would create an Israel-Egypt focused gas producer including NewMed’s stake in Israel’s giant Leviathan offshore field at a time when Europe needs non-Russian energy supplies.

The replacement directors suggested by Palliser include Hesham Mekawi, BP’s former North Africa regional president, and Christopher Cox, who was CEO of Spirit Energy and held positions at Centrica and BG Group, Reuters reported.

On Monday, Capricorn added: “Capricorn Energy  … today filed an investor presentation and the board of directors sent an open letter to shareholders regarding Capricorn’s proposed special dividend and combination with NewMed Energy, a leading Israeli energy limited partnership.

“The combination returns substantial capital to shareholders while creating a MENA gas and energy champion and one of the largest upstream energy independents listed in London …

“The board believes the combination will deliver compelling near-term and long-term capital returns and sustainable growth …

“Capricorn has been actively considering all strategic alternatives for over a year and publicly ‘in play’ since June 2022, meaning that interested parties have had (and continue to have) the opportunity to make competing proposals and while alternative counterparties have been allowed to review company data, no better alternative transactions have been tabled to date.

“If the board were to receive a potentially superior proposal, it would of course act in accordance with its fiduciary duties and consider such a proposal carefully.  The board is completely committed to maximising shareholder value …”

In a press release, Palliser Capital said: “Palliser Capital announces today that it has formally requisitioned the board of Capricorn Energy PLC  to convene a general meeting of shareholders (EGM) given a loss of confidence in the judgement and priorities of the current board and its sustained inability to execute a value accretive corporate strategy.

“The EGM will enable shareholders to vote on the removal of seven existing board directors and the appointment of six highly qualified and experienced independent candidates to replace them.

“The director candidates proposed by Palliser are exceptionally well-qualified and possess all the relevant skills and experience to source candidates for, or themselves fill, any senior executive vacancies that may arise at Capricorn.

“If appointed, the director candidates are expected to carefully and transparently assess all go-forward strategic options available to Capricorn, including all aspects of the Value Optimisation Plan.

“The plan published by Palliser on 27th October 2022 outlines a clear path to unlocking up to 400 pence per share in total value for Capricorn shareholders over the medium term.

“Further background can be found in Palliser’s letter to shareholders and accompanying presentation outlining the nominees’ backgrounds and qualifications.

“By Palliser’s assessment, shareholders representing more than 40% of Capricorn’s issued share capital disapprove of the NewMed transaction and at least a similar level of support is expected for comprehensive board change.

“Prior to today’s announcement, letters of intent have already been submitted by three of the company’s largest shareholders (other than Palliser) in support of Palliser’s proposal, indicating that holders of over 28% of Capricorn’s shares have lost trust in the existing directors and agree that drastic board change is now required.”