Tullow Oil seal merger to create African energy giant

The two firms have reached agreement over a merger that gives Tullow the upper hand with a 53-percent stake and Capricorn the rest.

The merger deal "represents a unique opportunity to create a leading African energy company listed in London", the pair said in a statement.

The enlarged group will possess "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", they noted.

London-based Tullow has operations mainly in Africa -- in Ivory Coast, Gabon, Ghana, Kenya and Mauritania -- and also in South America.

Capricorn, formerly known as Cairn Energy, is based in Edinburgh and has activities in the North Sea, Mauritania and Egypt, as well as Israel, Mexico and Suriname.

The new group will have a combined market value of £1.4 billion (1.6 billion euros, $1.8 billion), based on Tuesday's closing share prices.

Capricorn investors will receive 3.8 new Tullow shares for each Capricorn share under the agreement.

"The boards of Tullow and Capricorn believe the combination has compelling strategic, operational and financial rationale, with the ability to deliver substantial benefits to shareholders, host nations and other stakeholders," they added.

The transaction is expected to complete in the fourth quarter and generate annual cost savings of $50 million.

Courtesy: AFP