Tullow Oil has confirmed its merger with Capricorn Energy, a fellow British oil and gas company that offers the combined entity oil reserves in excess of a billion barrels across multiple countries in Africa.

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A statement from Tullow said: “The boards of directors of Tullow Oil PLC (Tullow) and Capricorn Energy PLC (Capricorn) are pleased to announce that they have reached agreement on the terms of a recommended all-share combination of Tullow and Capricorn (the Combination) to create the combined group.

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It is intended that the combination will be implemented by means of a court-sanctioned scheme of arrangement under Part 26 of the Companies Act, where Tullow will acquire all of the issued, and to be issued Capricorn Shares.”Under the terms of the combination, the statement continued, each Capricorn shareholder will be entitled to receive 3.8068 new Tullow shares for each Capricorn share on completion of the combination.

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This will allow Capricorn shareholders to hold approximately 47 percent of the combined group, and Tullow shareholders will hold approximately 53 percent of the combined group.The statement added that the combined group will generate meaningful cost synergies and create additional shareholder value.

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“The Tullow board, having reviewed and analysed the potential cost synergies of the combination, and taking into account the factors it can influence, believes the combination will result in US$50million of pre-tax net cash cost synergies on an annual run-rate basis by the second anniversary of the completion of the combination.

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“The Tullow board expects approximately 71 percent of these anticipated quantified net cash cost synergies to be achieved by the end of the first twelve-month period following completion of the combination. The Tullow Board estimates that realisation of these net cash cost synergies will give rise to one-off costs of approximately US$45million incurred in the two years post-completion of the combination.

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“The Tullow Board has considered potential areas of dis-synergy, and these were determined to be immaterial for the analysis. These anticipated net cash cost synergies will accrue as a direct result of the combination, and would not be achieved on a stand-alone basis.

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”Commenting on the combination, Rahul Dhir, Chief Executive Officer of Tullow, who maintains the role of CEO, 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.

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“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.

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”Commenting on the combination, Simon Thomson, Chief Executive Officer of Capricorn, who becomes Chief Finance Officer (CFO) said: “The combination of our businesses will create a leading African energy company with significant scale and opportunities for growth.

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Our two companies share a track record and continued vision of responsible energy production to support the economic and social development of our host communities.“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.”Source: Ghanaweb via thebftonline.com

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