Serica Energy rejects improved Kistos offer

UK oil and gas company Serica Energy has rejected a revised merger proposal from smaller Kistos, saying the new offer does not reflect the values of its core assets.

Kistos, led by North Sea dealmaker Andrew Austin, said on Monday it had made a revised cash-and-shares offer for Serica at 425 pence a share, an 11 per cent increase from its previous offer and one that values the company at about £1.2bn.

Under the terms of the offer, Serica shareholders would receive 0.4 new Kistos shares plus cash of 213p for each of their existing shares. The offer represents a 19 per cent premium to Serica’s closing price of 357p on Friday.

The offer also included a proposal for Antony Craven Walker, Serica chair, to continue in the same role at the merged entity, and for Austin to assume the role of chief executive.

Serica said in a statement on Monday that the new offer “does not reflect the underlying value of Serica’s existing core producing oil and gas assets”. It added that the deal “relies on using Serica’s own cash to partly fund the cash component of the transaction” which would leave a combined entity “with a weaker balance sheet” compared with Serica’s current position.

“Serica shareholders are strongly advised not to take any action,” the company said.

Serica’s shares rose as much as 2.5 per cent in early trading on Monday to 366p, while Kistos shares dropped as much as 3.7 per cent before paring its losses.

Kistos was set up by Austin in 2020 after he sold his previous company RockRose Energy for £250mn. The company first approached Serica in May about the merits of joining the two North Sea-focused companies but has repeatedly been rebuffed.

Following the initial approach by Kistos, Serica’s board in July submitted a counter offer to buy Kistos, which Kistos rejected saying the offer value of 483p represented a premium of only 4 per cent to the company’s share price at the time.

Kistos, with a market capitalisation of £436mn versus Serica’s £970mn, said the deal would allow Serica shareholders to “gain direct unhedged exposure to the stronger continental European gas market” through Kistos assets.

Austin’s company has said the combination of the two companies would create a “leading independent North Sea champion” that could act as a consolidator in the region.

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