UK-based Tullow Oil has signed all-stock merger agreement with Capricorn Energy to create a an Africa-focused energy company with a market value of more than £1.4bn.
As part of the deal, shareholders of Capricorn, formerly known as Cairn Energy, will receive 3.8068 of new Tullow shares for each share held.
According to Reuters, the agreement is valued at approximately £656.9m ($826.7m).
Tullow CEO Rahul Dhir will lead the new combined group, which is expected to have output of around 100,000 barrels of oil equivalent per day.
Upon completion of the transaction, Tullow shareholders will hold approximately 53% stake in the combined entity while Capricorn shareholders will own the remaining 47% interest.
The combined group, which will be listed in London, will have a diversified pan-African upstream portfolio supported by low-cost producing assets.
Planned to be headquartered at Tullow’s office in London, the merged entity is expected to have one billion barrels of resources spread across countries such as Ghana, Egypt, Gabon and Côte d’Ivoire.
The two firms said in a 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.”
The new company’s board will include two from current Tullow non-executive directors and three from current Capricorn nonexecutive directors.
Capricorn CEO Simon Thomson said: “This combination will allow the two companies to accelerate investment in new opportunities across the continent, while retaining a resilient balance sheet and delivering attractive returns to shareholders.”
