Investor concerns call Tullow-Capricorn merger into question: Legal and General Investment Management (LGIM), one of Europe’s biggest asset managers, has voiced its “strong reservations” about the planned GBP 1.4 bn merger between Tullow Oil and Capricorn Energy — formerly Cairn Energy — in an all-stock transaction. There is “no clear strategic rationale” for the merger, LGIM said in a statement to the Financial Times.

Their primary concerns: A slowed shift from fossil fuels + a worse financial situation for Capricorn: LGIM said it is concerned that the merger would “worsen” Capricorn’s transition away from fossil fuels. The merger would also give indebted Tullow access to Capricorn’s money. “It looks a better [transaction] for Tullow than it does for Capricorn,” another Capricorn shareholder told the FT.

Tullow may have to cough up more to get Capricorn shareholders on board: Other investors are also concerned that the transaction terms work in the favor of Tullow’s shareholders, the FT writes. At least 75% of Capricorn’s shareholders need to vote for the acquisition before it goes through, suggesting that the two sides may need to amend the terms of the transaction.

Why do we care? Capricorn has had a presence in Egypt ever since it acquired Shell’s oil and gas assets in the Western Desert with partner Cheiron last year under an agreement worth up to USD 926 mn. Those assets would form the second largest item on the newly merged company’s balance sheet, after Tullow’s flagship Ghanaian oil fields. The new, larger group will be an “important supplier of gas in Egypt and Ghana,” the companies said.

What they said: “We value the views of all our stakeholders and will continue to engage with them over the coming months…We believe the combination will provide significant near-term value growth from reduced costs, accelerated growth and a regular dividend distribution policy,” Capricorn said in a statement.