Oil and gas investor Kistos (KIST:AIM) has revealed plans for a £1 billion tie-up with its larger rival Serica Energy (SQZ:AIM).
London-based energy industry investor Kistos said its proposed combination terms valued Serica at 382p per share or a 25% premium to yesterday’s closing share price of 305p.
Kistos is offering 0.2932 new Kistos shares and 246p in cash for each Serica share. Under the terms of the deal, Serica's shareholders would own roughly 50% of the combined new firm.
Serica shares are up 12.3% to 342.5p, while Kistos is ahead by 5% to 486.3p.
Serica previously rejected an offer on the same terms in May, though noted the benefits of a combination and proposed a ‘limited mutual exchange of information under a non-disclosure agreement’ to explore a transaction.
Serica made its own counter cash-and-shares approach in early July valuing Kistos at 483p per share.
Serica's approach - 90p in cash and 1.29 new Serica shares for each Kistos one held - represented a premium of 12% to Kistos' closing share price on 30 June and was itself rebuffed.
DEALS MAY NEED TO BE SWEETENED
Arguably neither bid was pitched at enough of a premium to get a deal across the line, although now the news is public there may be shareholder pressure to progress matters given the strategic merits which both parties have acknowledged.
Kistos believes post any agreement the company could move to the Main Market, where based on current valuations it would qualify comfortably for inclusion in the FTSE 250 index.
SP Angel analyst David Mirzai commented: ‘Kistos’ management believes that the proposed merger would create a 40,000 barrel of oil equivalent per day North Sea player with sufficient scale and liquidity to trade on the Main Market and therefore attract a higher valuation multiple from investors than is currently demonstrated by either company on its own.’
