(Alliance News) - Independent Oil & Gas PLC on Monday said it does not intend to make a takeover offer for fellow AIM-listed oil and gas firm Deltic Energy PLC.
In September, Independent said it was considering a possible all-share offer for Deltic whose shares are currently trading 10% lower at 1.03 pence each, giving Deltic Energy a market capitalisation of GBP16.2 million.
However on Friday, London-based Independent said it will not proceed with the proposed takeover as the board of Deltic refused to engage with an initial approach in August and also rejected a second approach made in September.
The company said that while it believes that at the right level, a transaction would have considerable industrial logic, consolidating and scaling up two complementary portfolios with a balance of near-term catalysts and longer-term upside, it will not pay over risked fair value for assets, not least given the quality of its own existing portfolio and near-term development opportunities.
Deltic Energy responded by saying it believed the terms of the initial approach in August implied an offer value at the time which was less than its cash balance and therefore placed no immediate value on Deltic's portfolio. It added that while the second offer was an improvement on the first, the terms implied a discount of more than 10% to the market value of Deltic's shares based on the closing mid-market price of a Deltic and IOG ordinary share on September 24, the day before the amended offer was received.
"The board therefore decided that the amended proposed merger was not in the best interests of Deltic shareholders and it should therefore be rejected. In coming to this decision, the board considered a range of factors and risks associated with the amended proposed merger and concluded that the terms continued to materially undervalue Deltic and its portfolio of assets, which had been further enhanced following the award of six additional licences in the UK's 32nd licensing round," Deltic Energy said.
Shares in Independent Oil were trading 2.7% lower at 12.65p each on Monday afternoon in London.
By Ife Taiwo; ifetaiwo@alliancenews.com
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Deltic Energy (DELT)