Capricorn Energy's third-biggest shareholder, Palliser Capital, has called for a general meeting to set a vote on removing seven Capricorn directors from supervisory roles including the CEO, according to documents seen by Reuters.

Palliser is one of a chorus of Capricorn investors opposed to a planned merger with NewMed Energy that would create a gas producer focused on Israel and Egypt at a time when Europe is looking for non-Russian gas, arguing that it undervalues Capricorn.

"We have requisitioned the board of Capricorn Energy...to convene a general meeting [EGM] of the company," Palliser chief investment officer James Smith said in a Dec. 19 letter to Capricorn shareholders.

"The EGM will enable shareholders to vote on resolutions to effect the removal of seven current Capricorn directors and the appointment of six independent, highly-qualified replacement candidates."

A spokesperson for London-based Palliser confirmed the content of the letter, one of two that were sent to shareholders.

The directors that Palliser wants to remove include Capricorn CEO Simon Thomson and its CFO, also named James Smith, who both hold executive and supervisory roles.

Palliser's move ostensibly targets their removal from supervisory roles, although their executive future at the company would be called into question if Palliser succeeds.

Capricorn's articles of association, posted on its website, say "the appointment of any director to any of the executive offices specifically mentioned...shall automatically terminate if he ceases from any cause to be a director."

This refers to a list of positions including CEO, but not CFO.

Merger opposition

Capricorn shareholders who have publicly opposed the planned deal with Israeli-based NewMed include Palliser, Madison Avenue, Kite Lake, Newtyn Management and Legal and General Investment Management, representing around 32% of Capricorn's shares, according to a Reuters tally using Refinitiv Eikon data.

Palliser, in one of the letters to Capricorn shareholders, said its tally of opposition to the NewMed deal stood at more than 40%, adding that it had assurances from shareholders totaling 28% who had also "lost trust in the current board."

Edinburgh-based Capricorn needs a simple majority to agree to the merger, for which it plans to circulate a prospectus early next year. In September, it ditched a plan to merge with Tullow Oil after a similar list of investors voiced opposition.

The shareholder meeting to vote on Palliser's resolutions has to take place by Jan. 30, Palliser said.

The replacement directors suggested by Palliser include Hesham Mekawi, BP's former North Africa regional president, and Christopher Cox, who was CEO of Spirit Energy and held positions at Centrica and BG Group.

Two non-executive directors of Capricorn's nine-person board would remain in place if Palliser's plan gets voted through.

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