Serica board rejects revised offer from Kistos

The AIM-traded firm’s revised offer consisted of 0.4 new Kistos shares for each Serica share, and cash of 213p per Serica share.

It said the revised offer gave a value of 425p per Serica share, making it an 11% improvement in value from the first offer it made.

“Under the revised combination terms, Serica shareholders would own approximately 58% of the issued share capital of the combined business, in addition to receiving a significant cash component,” Kistos said in its statement.

“The revised combination Terms represent a reduced level of leverage in the combined company by approximately £93m relative to the terms presented in the first possible offer announcement, reflecting feedback from both the board of Serica and Serica's shareholders.

“In addition, the board of Kistos also believes that the proposed combination would allow Serica shareholders to gain direct unhedged exposure to the stronger continental European gas market through Kistos' Dutch gas assets.”

Kistos said it presented the revised offer to the Serica board on 22 July, but said it was rejected “with no rationale given nor engagement with the board of Kistos”.

The Serica board, meanwhile, said in its own statement on Monday that it “strongly believes” that the revised Kistos offer did not reflect the underlying value of Serica's existing core producing oil and gas assets.

“[The offer] takes no account of Serica's plans and capability for organic investment in its existing fields to increase production, reserves and asset life,” Serica’s directors said.

“For example, the company has replaced practically all of its produced volumes in the last two years and recently announced positive early results from its LWIV campaign which has increased the production from only two wells by over 3,000 barrels oil equivalent per day.”

Serica also described the offer as “opportunistic”, given the “recent and potentially temporary” disconnect between continental and UK gas prices, and the North Eigg exploration prospect currently being drilled, where Serica has a 100% working interest, and targeting over 60 million barrels of oil equivalent of net P50 unrisked recoverable prospective resources.

“[The offer] results in Serica shareholders funding much of the purported premium themselves - Kistos' market capitalisation is significantly smaller than Serica's and the Kistos revised possible offer is approximately 50% in shares.

“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.”

At 0926 BST, shares in Kistos were down 0.94% at 525p, while those in Serica Energy were up 0.93% at 360.32p.

Reporting by Josh White at Sharecast.com.