Capricorn Energy has terminated its proposed merger with Tullow Oil to pursue a deal with Israeli pure fuel group NewMed Energy.

As per the terms of the agreement, shareholders of Capricorn will receive a cash dividend of $620m, which equates to £1.72 per share.

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Commenting on the deal, Capricorn Energy chair Nicoletta Giadrossi said: “The combination with NewMed and a cash special dividend represent the delivery of significant value for Capricorn shareholders.

“We believe this is a compelling transaction which combines near term value realisation with ongoing participation and value creation in a world class gas company.

Capricorn Energy faced severe criticism from its shareholder over its deal with Tullow Oil, which refused to raise its offer price.

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The latest deal with NewMed is expected to deliver Capricorn shareholders a value of 271 pence per share while the deal with Tullow had valued Capricorn at nearly 210 pence per share.

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The deal will see Capricorn Energy issuing 2.34 of its shares for each share in NewMed Energy.

The deal will give Capricorn shareholders a nearly 10% stake in the merged entity while the Israeli company’s unit holders will own the remaining 90% stake.

NewMed Energy CEO Yossi Abu said: “With Capricorn, we have a shared vision on a disciplined capital allocation framework and a strategy to potentially significantly increase our production while expanding to the LNG market, with the aim of supplying Europe’s growing gas demand.

“The combination will play a pivotal role in the energy transition, through organic brownfield cost effective developments while delivering attractive returns to our shareholders.”

The merged entity will be publicly listed in London and operate under brand name NewMed Energy.

It is expected to have a net working interest production of 690 million standard cubic feet per day.