- Firms in reverse takeover talks
- Serica shareholders to receive majority stake
- Combined entity to be worth £670 million
Leading UK Independent energy companies EnQuest (ENQ) and Serica Energy (SQZ:AIM) jumped 15% and 4% respectively on Friday (7 March) after the two firms confirmed they are in discussions about a potential all-share reverse takeover.
Over the last 12-months Serica shares are down by around a third and EnQuest shares have lost 5%.
The Serica board believes there are ‘substantial’ potential benefits of combining with EnQuest, including increasing scale and diversification, and unlocking ‘significant’ synergies.
Although discussions are ongoing it is envisaged the two parties are looking to structure the deal as a reverse all-share offer by EnQuest for Serica with Serica shareholders receiving a majority stake in the enlarged entity.
Serica has a market capitalisation of around £470 million compared with EnQuest’s market value of £200 million, so the the combined entity would have a market capitalisation of just under £700 million, making it eligible to for inclusion in the mid-cap FTSE 250 index.
It is expected the transaction would also involve a return of capital to existing Serica shareholders.
KILLING TWO BIRDS WITH ONE STONE
In a full year trading update on 21 January, Serica said it was undertaking preparatory work on moving to the main market this year and actively screening a broad range of cash-generative and value accretive merger and acquisitions opportunities in the North Sea and other geographies.
The proposed all-share transaction with EnQuest could solve both aims for Serica in one foul swoop. Serica is one of the UK’s top 10 oil and gas producers and reported an average production of over 40,000 barrels of oil in 2024.
Under stock exchange rules EnQuest has until the close of play on 4 April to make a firm offer or walkaway.
