Serica rejects $1.4bn Kistos takeover bid

UK gas producer Serica Energy has again dismissed a cash-and-shares takeover bid from energy investor Kistos, Serica said on July 12.

Kistos was offering £2.13 in cash for each Serica share, in addition to 0.4 shares in its company, valuing Serica at almost £1.2bn ($1.4bn). Serica said the revised bid reduced the cash element by £0.33/share in exchange for greater equity for its shareholders, which rose to around 58% from 50% in the first offer.

The deal envisages Kistos CEO Andrew Austin continuing as CEO of the combined entity, while Serica's Tony Walker would be appointed chairman. Serica said the new cash offer also includes a 67% "capital contribution" from its own resources. 

The bid follows an offer earlier this month that consisted of 0.2932 new shares in Kistos and £2.46 for every share. Kistos, which argues the combined entity would be a leading North Sea independent, made two more offers for Serica's share capital in May and June.

While Kistos says the bid represents an 11% increase in headlines terms, Serica believes over 60% of that value is derived from a short-term rally in Kistos's share price that started on July 11.  Kistos stocks were 24.8% higher month/month early on July 25, trading at £5.24/share. 

The Serica board believes the revised offer fails to reflect the "underlying value" of its portfolio, including organic capex spends at its existing North Sea assets to boost production, reserves and lifespan.  Serica's holdings include the Bruce, Keith and Rhum gas fields in the north North Sea, and the Columbus and Erskine deposits in the central North Sea.

Serica said: "The structure proposed in the Kistos revised possible offer is fundamentally unchanged from the [first offer] leaving the combined entity with a weaker balance sheet when compared with Serica currently, thereby compromising the scope for future investments and significantly increasing exposure to inherent business risks."

Kistos, meanwhile, is on an acquisition spree having purchased Tulip Oil's Dutch holdings last year and a 20% stake in TotalEnergies' Greater Laggan gas cluster, located West of Shetland Islands, earlier this month.