In a surprise move Columbus announced a recommended all share merger with the larger Bahamas Petroleum on 11th June. Leo Koot, Columbus Executive Chairman, gave us his view in an interview on 15th June, now London South East has talked to Tony Hawkins the Columbus CEO who gave us his considered perspective.

The main points which we took from the interview are as follows.

A recommended merger

1. The Board was unanimous in its decision to recommend the merger

2. The board took almost two months to come to that decision, met almost every day, took a great deal of advice and did a great deal of due diligence on BPC and its Perseverance asset.

3. The board took a 6-12 month view of where the company would be with and without the merger

Why did the board recommend the deal?

1. Because the merged entity will be larger, have more capital and be better placed to weather storms like Covid-19

2. Because the asset overlap between the two businesses is minimal

3. Getting access to an asset like Perseverence 1 on ground floor terms would not have been possible outside of the merger

4. VSA our Rule 3 adviser told the board that 'the financial terms were fair and reasonable'

Pricing

1. Pricing the deal wasn't easy, and was done on a comparison of the two sets of share prices. Each company has had a relatively volatile share price over the last 12 months. The price of 2.67 pence was based on the closing price the day before the deal was announced. If you look back to March Columbus was priced at 0.92 pence.

Negotiations

1. An announcement was made in March about the negative effect of Covid on operations. We began discussions and then due diligence with Bahamas in early April, so it was post Covid-19.

2. Undoubtedly our revenues have been affected by an oil price which has fallen by up to two thirds. That was an important consideration as well.

3. Capital markets like bigger companies, who find it easier to get funding, and there's more liquidity. The combined business will be bigger, more liquid, and that will provide more opportunity.

Perseverence prospects

1. It is massive, with multiple zones targeted. Even one success should lead to a commercial development.

2. Takeover Code restrictions make it difficult to talk about BPC

3. What is public is BPC have said they will drill the well in Q4 2020 or Q1 2021. The board did its due diligence on that. And that Stena have been signed up to drill the well.

The Board

Tony and Gordon are sad to be leaving the business, but see it as in the best interests of all stakeholders and not just shareholders. Leo stays on as a Non-Exec with responsibility for Suriname and South West Peninsula in particular.

Apologies for the delay in getting this interview out. Both interviews were signed off under Takeover Code rules which have made this a slow although worthwhile process!