Serica snubs improved Kistos merger offer
Serica Energy (Serica) has rejected an improved merger proposal from energy investment firm Kistos.
It believes the new offer does not reflect the overall value of its core assets.
It further argued that the deal relies on using Serica’s own cash to partly fund the transaction, which would leave a combined entity with a weaker balance sheet compare with Serica’s current position.
Last week, Kistos submitted a revised cash-and-shares offer for Serica at 425 pence a share, an 11 per cent increase from its previous offer which values the company at about £1.2bn.
It also proposed that Tony Craven Walker, Serica’s chairman, take on the same role at the combined company and that Kistos Chairman Andrew Austin assumes the role of chief executive.
The deal is a 19 per cent premium on Serica’s last closing price.
Serica’s latest snub is a setback to Kistos’ efforts to strengthen its foothold in the North Sea.
The company first approached Serica in May about the advantages of merging the two North Sea-focused companies but has repeatedly been rebuffed.
Kistos is headed by North Sea dealmaker Andrew Austin, and was set up in 2020 after he sold his previous company RockRose Energy for £250m.
The firm has a market value of £439.2m – compared with Serica’s £970.8m – and had previously made public an offer of 382p per Serica share, which was rejected by the company’s board in June.
Serica then approached Kistos on 1 July with a cash-and-stock offer of 483p per Kistos share, which was rejected by its own board.
Serica is one of the UK’s leading mid-tier North Sea oil and gas operators – with five fields in the North Sea producing 22,000 barrels of oil equivalent per day.
It currently operates the Bruce, Keith and Rhum producing assets in the UK Northern North Sea alongside Columbus Field, and is a partner in the Erskine Field in the UK Central North Sea.
Stifel analyst Chris Wheaton also revealed Serica shareholders should not accept the proposal and “instead wait for results of the North Eigg exploration well, which could add over 250p per share” to the company’s valuation.
He said: “Our view is unchanged: we think Serica shareholders should not accept the Kistos proposal, should it become a firm offer, and instead wait for the results of the North Eigg exploration well, which could add over 250p per share to our valuation. We retain our Buy rating and 350p target price, noting that at current UK gas futures curve pricing, our risked NAV would be in excess of 650p per share.”