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UK's Capricorn Energy rejects attempt to block NewMed deal

FILE PHOTO: Pipes carrying liquefied natural gas are seen on a tanker in the Mediterranean, some 10 kilometers from Hadera

By Ron Bousso and Aby Jose Koilparambil

LONDON (Reuters) -Capricorn Energy on Thursday rejected a plan by its third largest shareholder to scrap a proposed merger with NewMed Energy, saying its was based on false information.

In an open letter to shareholders, the board of Capricorn Energy asked stakeholder Palliser to review its planned merger with the Israeli company weeks after Palliser pushed for a board overhaul to block the deal.

Several other investors joined Palliser in opposing the merger with NewMed that would create a gas producer focused on Egypt and Israel when Europe is looking for non-Russian gas, saying it undervalues Capricorn.

Capricorn shares were down about 1% while NewMed shares were down by about 5% at 1456 GMT.

The board said in the letter that Palliser's plan was based on an overstated value of Capricorn as a standalone company and included "outdated and incorrect facts and assumptions," including being able to return to shareholders $620 million in cash.

Palliser's plan would deliver up to $866 million in fair market value, compared with $920 million from the current NewMed merger offer, the board said in the letter.

In a response to a Reuters email query, Palliser rejected Capricorn's argument it had overstated the company's value.

"(We) are concerned that this board appears intent on talking down the prospects of the company to justify their support for the flawed combination with NewMed - in effect a backdoor London listing for NewMed," a Palliser spokesperson said.

The Capricorn board asked Palliser representatives to review the company's internal business plan after signing a non-disclosure agreement.

Capricorn Energy said it would issue notice next week for a general meeting on Feb. 1 regarding Palliser's demand for the removal of directors and expects to hold a vote on the NewMed deal on or around the same date.

(Reporting by Ron Bousso in London and Aby Jose Koilparambil in Bengaluru; Editing by Subhranshu Sahu and Barbara Lewis)