Serica Energy board rejects £1bn bid from smaller oil and gas rival Kistos

A UK oil and gas company led by the North Sea dealmaker Andrew Austin has made a cash-and-shares offer valued at more than £1bn for its bigger rival Serica Energy.

Serica’s board rejected the bid.

Kistos, set up by Austin after selling his previous company RockRose Energy for £250mn in 2020, said on Tuesday that it first approached Serica in May about the merits of joining the two North Sea-focused companies but had repeatedly been rebuffed.

It has now gone public with its offer, valued at 382p per share, in the hope that Serica shareholders will encourage its board to engage with Kistos about the proposed combination.

Under the terms of Kistos’s offer, Serica shareholders would receive 0.2932 new Kistos shares plus cash of 246p for each of their existing shares. The offer represents a 25 per cent premium to Serica’s closing price of 305p on Monday.

Serica shares rose nearly 12 per cent in early Tuesday trading in London to 340p while those in Kistos edged up 0.5 per cent to 465p on Tuesday.

Serica’s share price has suffered recently after the UK government introduced a 25 per cent windfall tax on oil and gas producers’ profits, which raised their headline rate from 40 per cent to 65 per cent.

Since floating in London at 100p a share in November 2020, Kistos has made two acquisitions in UK and Dutch waters. The latest was a $125mn-plus deal for a 20 per cent stake in a group of gasfields north-west of the Shetland Islands from the French major TotalEnergies.

Kistos, which has a market capitalisation of £384mn versus Serica’s £829mn, said a combination of the two companies would create a “leading independent North Sea champion” that could act as a consolidator in the region.

There has been a significant changing of the guard in the North Sea since 2014 when a number of oil majors and utilities retreated or sold down their portfolios to focus on lower-cost regions elsewhere, or to invest in clean energy technologies.

Kistos believes a combined group would gain admission to London’s FTSE 250 index.