Berenberg slightly raises target price on Capricorn Energy

Berenberg stated the proposed merger came with an implied valuation of roughly 271.0p, a 13% premium to the stock's close price on 28 September, and "significantly improved terms" versus its previously agreed merger with Tullow.

"The combined business provides exposure to long-term gas production, generating stable cash flow and dividends," said the analysts.

However, Berenberg stated that based on previous shareholder views on valuation related to the Tullow merger, it was possible that some may still see the offer as a discount to the value in Capricorn's portfolio and that securing the required majority approval was not guaranteed.

"We make some minor adjustments to our medium-term forecasts and retain our 'hold' rating," said the German bank.

"There are no obvious operational or financial synergies as a result of the merger, in our view, although it does create a wider regional footprint for businesses. The terms are clearly significantly improved versus the previous Tullow offer; however, they still arguably leave some low-risk value on the table given the cash components of Capricorn's NAV – we believe some shareholders will continue to look for more value and that majority approval of the merger is not guaranteed."

Reporting by Iain Gilbert at Sharecast.com