Serica Energy has knocked back a new cash and share-for-share takeover bid from North Sea rival Kistos.
The proposed deal is worth £1.15 billion and, if successful, would have ousted Serica chief executive Mitch Flegg.
It would also have seen Andrew Austin, executive chairman of Kistos, become CEO of the combined business, with Serica chairman Tony Craven Walker leading the board.
Shareholders offered £2.13 and Kistos shares
Kistos had an earlier, £1bn bid rejected on July 12 and wrote to Serica on July 22 to outline its updated proposal, for which details emerged today. The latest plan offered £2.13 plus 0.4 Kistos shares for each unit of Serica stock.
London-headquartered Kistos said it equated to a revised offer of £4.25 per Serica share, representing a premium of £3.57 per unit as of the closing price on July 22.
Serica noted the 11% increase in value overall but said the brunt of the rise was driven by the jump in Kistos’ share price since July 11.
Rejected the revised offer, which it said still undervalued the company, Serica added the proposed takeover would mean a change in leadership “during a crucial period for the industry”.
Serica also praised its management team for a 1,120% share price rise over the past five years.
It added the Kistos offer took no account of its investment plans or the potential of its North Eigg exploration well.
Serica also decried the proposed cash payment of £2.13 per share, saying the 67p shareholder distribution it includes would be coming out of its own coffers, not Kistos’.
London-based Serica added: “Following careful consideration, the board of Serica, together with its financial advisers, has unanimously rejected the Kistos revised possible offer.
“The board reiterates its position that it will not recommend any deal on terms which it believes are unattractive to its shareholders and wider stakeholders.
“Serica shareholders are strongly advised not to take any action.”
Deal doldrums?
Kistos’ previous offer for Serica was also rejected due to it undervaluing the company.
Serica then made a counter-offer for Kistos. It was also rejected due to valuation concerns and Kistos being unable to retain its board.
As of July 15 2022, Serica had 271,960,864 shares in circulation, according to its website.
Under the revised terms from Kistos, Serica shareholders would own about 58% of the total issued share capital.
Different perspectives
Kistos said its proposal would give Serica access to a “stronger continental European gas market”.
Serica – whose shares were up by more than 5% at £3.75 at today’s London market close, has previously described Kistos’ overtures as an “opportunistic reaction” to the recent disconnect in gas prices between the UK and mainland Europe.
But Kistos – down nearly 1% at £5.25 – has said a merger of the two firms would deliver a “leading independent North Sea champion”, with “strong industrial logic” unlocking value creation and scale.
Both firms have until August 9 under UK takeover rules to either make a firm offer or say they do not intend to do so.
Serica is on record as saying it supports a mergers and acquisitions deal to deliver growth.
But earlier this month it said its boardroom team “will not recommend any deal on terms which it believes are unattractive to its shareholders and wider stakeholders”.
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