Capricorn Board Picks DNO Offer over Genel
This article was first published on Rigzone here
Capricorn Energy PLC's board has agreed to the terms of an acquisition offer by DNO ASA for up to around $396 million in cash and recommended that shareholders vote for the higher offer over an existing offer by Genel Energy PLC.
Oslo-based DNO and London-based Genel, both partners in a producing oil project in Iraq's Kurdistan region, are competing to enter Egypt via Edinburgh-based Capricorn. DNO had made a rejected offer to buy Genel but recently said it remains open to pursue another offer.
DNO is offering Capricorn shareholders up to $5.214 per Capricorn share with reservations, consisting of an acquisition price of $4.224 and a special dividend of $0.99.
A regulatory disclosure by DNO and Capricorn on Tuesday said the total represents an increase of about $36 million from the implied value of Genel's offer.
DNO and Capricorn intend to implement the transaction by way of a Scottish court-approved scheme between Capricorn and Capricorn shareholders. The arrangement would require approval by at least 75 percent of shareholders at the court meeting and at Capricorn's general meeting.
However, DNO has reserved the right to acquire Capricorn by way of a takeover offer.
"DNO intends to develop Egypt as a third core area alongside the North Sea and the KRI [Kurdistan region of Iraq], and has ambitious plans to build a significant Egyptian business over time, both operated and non-operated, through investment in the acquired portfolio, exploration and development activity and further acquisitions", the filing by DNO and Capricorn said.
"DNO believes that Capricorn's Egyptian assets and established in-country team provide a high-quality entry point and a platform from which to expand, particularly in the Western Desert, a well-established producing region with extensive infrastructure, proven petroleum systems and continuing industry investment", it added.
Genel is offering Capricorn shareholders the same special dividend of $0.99 per share but a lower acquisition price of $3.75 per share, according to a filing by Genel and Capricorn July 2.
Genel also plans to make the acquisition through a court-approved scheme but holds the right to pursue a takeover instead.
DNO and Capricorn acknowledged Tuesday Genel's offer for Capricorn had already achieved approval last month but that Genel's offer has yet to hurdle other conditions including approval from state-owned Egyptian General Petroleum Corp (EGPC). EGPC is a partner in Capricorn's assets in the North African country.
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"Although the Genel offer has not lapsed as a result of this announcement, in light of their intended recommendation of the acquisition, the Capricorn directors do not currently intend to ask the court to sanction the Genel scheme or to declare the special dividend in connection with the Genel offer", their filing said.
"Following the DNO offer, Genel is considering its position and a further announcement will be made when appropriate", Genel said in an online statement Tuesday. "Capricorn shareholders are strongly advised to take no action in response to the DNO offer in the meantime".
Last month DNO revealed it had made a rejected acquisition proposal to Genel but said it remains willing to pursue negotiations with the latter's board.
Under the failed proposal DNO was to obtain Genel's entire issued share capital at an indicative cash offer of 69 pence (93 cents) per Genel share. The offer valued Genel at around GBP 202 million.
Alternatively Genel shareholders would have the option to receive a combination of cash and newly issued DNO shares equivalent to the indicative cash offer per Genel share.
The proposal "delivers a substantial premium to Genel's undisturbed share price, reflecting, in DNO's view, full value for Genel's assets notwithstanding the continuing uncertainty over its sole revenue generating asset", DNO said, referring to the two-field Tawke production sharing contract in Kurdistan.
It also "provides certainty of value irrespective of the outcome of Genel's offer for Capricorn Energy PLC on the terms announced on 2 July 2026, which, if unsuccessful, would leave Genel without the diversification it has long sought and with a significant G&A burden that is disproportionate to its current scale", DNO said.
"DNO notes that a number of third parties have announced possible offers for Capricorn and there can be no certainty that Genel's offer for Capricorn will be successful".
Genel said in a statement August 7 its board assessed that "the possible offer fundamentally undervalues Genel".
The filing Tuesday by DNO and Capricorn said, "The Genel board has not yet engaged constructively with DNO regarding DNO's Genel proposal".
To contact the author, email jov.onsat@rigzone.com
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