Victory for activist investor as Capricorn directors resign en masse

Directors at Capricorn Energy all resigned yesterday in a victory for an activist shareholder.

Seven board members, including chief executive Simon Thomson and chairman Nicoletta Giadrossi, have agreed to step down from the oil and gas group.

Both will leave the board immediately alongside three other directors Peter Kallos, Alison Wood, Luis Araujo. 

Purged: Seven Capricorn board members, including chief exec Simon Thomson and chairman Nicoletta Giadrossi (pictured), have agreed to step down from the oil and gas group

Chief financial officer James Smith will step down at a later date alongside non-executive director Keith Lough. 

The exodus follows weeks of pressure on Capricorn’s management regarding controversial plans to merge with Israeli rival NewMed Energy. 

Palliser Capital, the company’s third largest investor with a stake of around 6.9 per cent, has been spearheading a campaign to scrap the plan and called a vote to remove seven directors.

The activist wanted to replace Capricorn’s executives with its own nominees, which included Chris Cox, the former head of Spirit Energy, and Hesham Mekawi, who previously worked as head of BP’s North African operations.

The effort to stop the merger has been backed by several other shareholders and advisory firms, with both Glass Lewis and ISS recommending investors oppose the deal.

A vote on the deal was due to take place on February 1, with Capricorn shareholders due to decide on whether to replace the directors at a separate ballot later that day.

But the company announced the merger vote has been pushed back to February 22.

The vote on the make up of the board will still take place, however, as Palliser has put forward six candidates to join as directors including Cox and Mekawi.

Capricorn said the delay on the merger vote would allow the new board to ‘assess the proposed NewMed combination alongside other strategic options’ before deciding on the company’s next move.

Analysts at broker Stifel said the boardroom clear out showed Palliser has ‘won the argument with shareholders’.

They added the upheaval could allow Capricorn to ‘re-enter merger talks with NewMed’ in the near future from ‘a position of strength’.

The business’s shares inched up by 0.2 per cent, or 0.4p, to 244.8p.

Capricorn is one of the largest gas-focused energy companies listed in London, with a portfolio covering operations in the North Sea as well as projects in Egypt, Mexico, Suriname and Mauritania.

Last September, the group announced plans to merge with NewMed in a deal which would have paid shareholders a £503million special cash dividend.

The merger valued Capricorn at £274million, equivalent to 271p per share and a 13 per cent premium to its share price the day before the deal was announced. 

But the plans ran into intense opposition from several major shareholders, who argued the tie-up undervalued the business. 

Following Palliser’s opposition, Capricorn’s largest investor, New York-based Madison Avenue Partners, backed the effort to oust the board and vote against the merger.

And earlier this month Legal & General Investment Management (LGIM) took the rare step of supporting the opposition based on what it said were grave concerns about the deal with NewMed.

LGIM added that the firm’s decision to hold the merger vote before the ballot on replacing the directors appeared to be an attempt to ‘undermine due process’ and had raised ‘serious questions about the ongoing suitability and fitness of the entire board.’

Other major investors that have publicly opposed the NewMed merger include London-based investment manager Kite Lake Capital, which owns 7.4 per cent of the business, and Newtyn Management which holds just over 6 per cent.

Together, the five major opposition shareholders own over 32 per cent of Capricorn, providing a large bulwark against the deal which may have scuppered its chances of passing.

This post first appeared on Dailymail.co.uk