Tullow Oil said it remains committed to its planned all-share merger with Edinburgh-based Capricorn Energy, despite the reservations of key shareholders.

Those objecting to the proposed tie-up include Kite Lake Capital, Palliser Capital, Legal & General Investment Management and Schroders who say the deal undervalues Capricorn, previously known as Cairn Energy, the explorer founded by former Scottish rugby international Bill Gammell.

Capricorn’s board supports the merger, but last week the company’s chief executive Simon Thomson admitted that ‘alternative transactions’ were being explored after unnamed parties expressed interest.

The deal requires approval from at least 75% of Capricorn shareholders, a threshold that might be in jeopardy if hedge fund investors who have been critical of the deal turn their derivative investments into direct shareholdings.

Rahul Dhir, the Tullow chief executive who would head up the enlarged group, said today that his company was “fully committed” to the combination.

“We firmly believe that the proposed merger has the potential for material value creation by implementing a combined business plan which accelerates investment in key projects and delivers very significant synergies,” he said.

But there are concerns among Capricorn shareholders that the two companies’ assets are incompatible and that Capricorn’s cash pile would be used to help reduce Tullow’s net debt.

The terms of the deal would involve Capricorn shareholders ending up with about 47% of the enlarged business which would produce in the region of 100,000 barrels of oil per day with capacity from its existing assets to increase that to 120,000 by 2025.