Petroceltic International Plc (PCI), an oil and gas company with assets in Algeria, agreed to buy Melrose Resources Plc (MRS) for 165 million pounds ($259 million) to expand in North Africa and the Mediterranean.
Melrose shareholders will receive 17.6 new Petroceltic shares for each Melrose share, and Melrose will also pay a special dividend of 4.7 pence a share. The dividend and the shares represent a 9.7 percent premium to Melrose’s share price on Aug. 16, according to a statement today. Petroceltic shareholders will hold 54 percent of the enlarged company.
The acquisition brings together a portfolio focused on North Africa, the Mediterranean and the Black Sea. The deal will allow the group to compete with FTSE 250 companies such as Salamander Energy Plc (SMDR) and Soco International Plc (SIA) for investment, said Brian O’Cathain, chief executive officer of Petroceltic who will also head the new company.
“This gives us a better platform to grow,” O’Cathain said in a telephone interview today. “We’ll be able to produce 40,000 barrels of oil equivalent a day in five years. There’s huge upside potential for our resources.”
Petroceltic fell 9 percent to 7.44 pence as of the close in London. Melrose Resources rose 0.7 percent to 136.5 pence.
Petroceltic’s main assets are gas fields in Algeria, and it also holds licenses in Italy and the Kurdish region of Iraq. Melrose’s focus is on fields in Egypt and Bulgaria.
The enlarged company probably won’t sell off assets to focus on its biggest fields, though it may look to buy more assets in Egypt and Libya, O’Cathain said.
David Thomas, the CEO of Melrose, will become chief operating officer of the new company, and Petroceltic’s Tom Hickey will be the chief financial officer.
HSBC Holdings Plc will provide a $300 million debt facility for 18 months after the merger becomes effective.
Lambert Energy Advisory, N+1 Brewin and HSBC advised Melrose on the deal. Petroceltic was advised by Bank of America Merrill Lynch.
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