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 CEO Simon Thomson and chairman Nicoletta Giadrossi, have agreed to step down from the oil and gas group.

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

CFO James Smith will retire at a later date, along with non-executive director Keith Lough.

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

Palliser Capital, the company’s third-largest investor with a stake of about 6.9 percent, led a campaign to scrap the plan and called a vote to remove seven directors.

The activist sought to replace Capricorn executives with his own nominees, including Chris Cox, the former head of Spirit Energy, and Hesham Mekawi, who previously served as head of BP’s North African operations.

The effort to halt the merger was supported by several other shareholders and consultancies, with both Glass Lewis and ISS recommending investors oppose the deal.

A vote on the deal was scheduled to take place on February 1, with Capricorn shareholders deciding later that day whether to replace the directors.

But the company announced that the vote on the merger has been postponed to February 22.

The vote on the composition of the board is yet to take place, however, as Palliser has proposed six candidates to join as directors, including Cox and Mekawi.

Capricorn said the delay in 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 cleanup of the boardroom showed that Palliser “has won the discussion with shareholders.”

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

From the company shares incrementally increased by 0.2 percent, or 0.4p, to 244.8p.

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

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

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

But the plans were met with fierce opposition from several major shareholders, who claimed the partnership undervalued the company.

After Palliser’s opposition, Capricorn’s largest investor, Madison Avenue Partners of New York, supported 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 backing the opposition on reportedly serious concerns about the NewMed deal.

LGIM added that the company’s decision to hold the merger vote ahead of the vote on the replacement of the directors appeared to be an attempt to “undermine due process” and “raised serious questions about its continued suitability and suitability of the entire board.

Other major investors who have publicly opposed the merger with NewMed include London-based investment manager Kite Lake Capital, which owns 7.4 percent of the company, and Newtyn Management, which owns just over 6 percent.

Together, the five main opposition shareholders own more than 32 percent of Capricorn, creating a major bulwark against the deal that may have reduced its chances of success.