LONDON (Alliance News) - Independent Oil & Gas PLC on Tuesday confirmed it "promptly" rejected an unsolicited proposal from RockRose Energy PLC, which made a formal approach last Friday to possibly buy out IOG in a GBP27 million cash deal.
RockRose said it made a formal approach to the board of fellow London-listed natural resources firm Independent Oil & Gas on Friday last week.
The possible offer was priced at 20 pence per share, valuing IOG at GBP26.6 million. RockRose explained it would fund any possible deal through its existing cash resources.
Shares in IOG closed 35% higher at 19.00p on Tuesday.
Independent Oil & Gas said the offer was "opportunistic" and "materially undervalued" the company as well as not attributing fair value to its assets, nor their significant future upside.
"The board continues to focus its efforts on unlocking value in the company by securing a farm-out partner for its core project to provide funding optionality in parallel with IOG's stated capital markets funding plans," Independent Oil & gas said.
The price represented a 51% premium to the 13.25 pence share price at the close on February 26, when RockRose made its initial approach.
RockRose shares have been suspended since late February - having last traded at 815.00 pence - after it agreed to buy the UK oil assets of Marathon Oil Corp for USD140 million.
"The proposal was rejected by the board of directors of IOG, who have expressed an intention to continue in their endeavours to find a strategic partner to develop their assets," RockRose explained in a statement.
Despite this, RockRose argued its offer was "compelling" for IOG shareholders for a number of reasons.
These include the opportunity for IOG shareholders to realise an "immediate cash upside" to their stake at a "significant premium." Also, RockRose believed it would be "challenging" for IOG to fund the GBP450 million development capital expenditure required to develop its oil & gas fields.
RockRose also posited that "public sources" had implied some of the debt owed by IOG to London Oil & Gas Ltd may become "payable shortly" and thus could see IOG look to "secure additional funding to avoid the risk of default."
"RockRose believes that all IOG shareholders should be given the opportunity to consider the merits of the potential offer which would be at a more than 50% premium and made fully in cash by a credible bidder," RockRose explained.