Genel to Acquire Capricorn for $360 Million
Genel Energy PLC has entered into an agreement to acquire Capricorn Energy PLC for an expected price of $360 million (GBP 271 million) and thereby expand into Egypt.
Each shareholder of London-listed Capricorn is entitled to $4.74 in cash and a special dividend of $0.99 per share, the companies said in regulatory filings Tuesday.
Edinburgh-based Capricorn's core operations consist of development and production assets on Egypt's side of the Sahara desert. Genel, which also trades on the London Stock Exchange, currently derives its production from the Kurdistan region of Iraq, as well as holds exploration licenses in Oman and Somaliland.
"The Acquisition will create an independent energy company of scale in the MENA [Middle East and North Africa] region with a strong, low leverage balance sheet, significant production, reserves and resource upside", the merger parties said.
"The Enlarged Group will hold a geographically diversified production base, with pro-forma 2P [proven and probable] reserves of 117 mmboe [million barrels of oil equivalent] and production of 41,003 bopd (combined December 2025 exit rate) (split evenly between Kurdistan and Egypt)".
Egypt has a "well-established regulatory regime, stable contracts and attractive fiscal terms", the filings said.
"The resources and potential resources of the Enlarged Group offer significant opportunity for reserves replacement and growth in Egypt and Kurdistan, as well as the build-out of a further production hub in Oman and/or Somaliland", the companies added.
On May 19 Capricorn said it had received final government approval to consolidate 8 of its 50:50 jointly owned concessions in Egypt's Western Desert into a single license with more attractive fiscal terms. The new concession agreement extends the license by up to 20 years with a 10-year development term and 2 optional 5-year extension terms. The consolidated license allowed Capricorn to book an additional 20.2 MMboe in 2P reserves.
"Although the Capricorn Board remains confident in the ability of the management team to deliver shareholder value, it recognizes that realizing the full value of the new merged concession agreement may require a larger corporate group with additional revenue streams and greater flexibility to direct capital", the filings stated.
"A secondary focus has been to maximize value from its legacy UK North Sea position, primarily through the effective utilization of its UK tax losses. Capricorn has been actively assessing potential transactions in the UK North Sea and submitted a number of proposals. Currently, none of these proposals have progressed towards an executable transaction, and there is no certainty that management can create value from its UK business.
"Separately, the Capricorn Board recognizes the challenges that small and mid-cap London listed exploration & production companies have faced over recent years in attracting new investors. In particular, the Capricorn Board is aware that the low trading liquidity in Capricorn's shares relative to peer companies can act as a deterrent to potential new investors and limits the ability of current Capricorn Shareholders to monetize their positions efficiently".
Capricorn and Genel are processing the transaction by way of a Scottish court-approved "scheme of arrangement" between Capricorn and Capricorn shareholders. Upon the satisfaction of scheme conditions, including approval by a majority of Capricorn shareholders, the merger agreement will become binding on all Capricorn shareholders regardless of whether they had voted for the combination, the filings said.
Genel expects to fund the takeover with company cash and new debt.
As of the end of the first quarter Genel held $222 million in cash. Total debt was $92 million. Net cash stood at $131 million, Genel said in its quarterly report May 7.
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