Kistos PLC (AIM:KIST) is pitching a merger with Serica Energy PLC (AIM:SQZ) to create “an independent North Sea champion”, urging Serica’s shareholders to push its management into constructive discussions.
In a stock market statement, Kistos detailed a timeline of approaches and negotiations through the months of May, June and July – in which the two companies were talking under non-disclosure agreements (NDAs) and an offer was made by Serica.
Kistos, an acquisitive AIM-quoted firm led by executive chair Andrew Austin, told investors that whilst the parties agreed on the logic for a merger, the Serica offer undervalued its business.
Serica earlier this month offered to acquire Kistos in a cash-plus-shares deal – 90p per share cash plus 1.29 new Serica shares – which would have seen Serica shareholders own 72% of the enlarged company.
Kistos described the offer’s implied 12% premium as “low given the effective change of control”. It added that the terms were “at the wrong price, with the wrong mix of stock and cash”.
Having rejected the offer on Friday 8 July, the Kistos board has publicly presented alternative proposed terms, seeking 246p per share in cash and proposing an issue of equity such that Serica shareholders would receive 0.2932 new Kistos shares, plus a proposal to redistribute an extra 67p per share of Serica’s capital to its shareholders as a special dividend.
It said its proposal would be worth 382p per share to Serica shareholders, representing a 25% premium to Serica's closing price of 305p on 8 July.
This proposal would result in each set of shareholders holding 50% of the enlarged business, it noted.
“The board of Kistos continues to believe that there is compelling industrial logic in the combination of Serica and Kistos, and that the proposed combination would create significant value for shareholders of both companies,” Kistos said in Tuesday’s statement.
“The board of Kistos believes that Serica and Kistos trade on materially lower multiples versus their wider UK and Western European listed upstream independent peers and that the proposed combination has the potential to drive a re-rating of the combined company.”
Kistos earlier completed its entry into the UK North Sea, closing a deal with TotalEnergies to acquire a 20% interest in the Greater Laggan Area producing gas fields along with an exploration portfolio. It added to the company’s Dutch North Sea interests which include production and field development projects.
Serica, which yesterday spudded a new exploration well, produces more than 26,000 barrels oil equivalent per day – most of which, around 85%, is gas.
In Tuesday morning’s deals Kistos shares moved just over 3% higher at 478.5p whilst Serica shares were up 9% changing hands at 333p.