• Fund says MPI potentially worth more than Maurel's offer
  • Predicts upside for MPI shareholders if deal called off

Cape Town-based fund Allan Gray Ltd., one of Africa’s largest money managers, said it is against a merger of French oil companies Etablissements Maurel & Prom SA and MPI.

The proposed deal is only slightly above the value of MPI’s cash holdings and ignores the Paris-based explorer’s 20 percent stake in Nigeria’s Seplat Petroleum Development Co. Plc, said Andrew Lapping, a money manager at Allan Gray’s Africa Equity Fund.

“This is clearly not in the interests of MPI minorities and we are putting maximum effort into protecting value for all MPI shareholders,” Lapping said in the fund’s report for September. “If the merger is called off, the MPI risk profile is heavily skewed to the upside.”

Maurel said in August it wanted to merge with MPI to lower costs and taxes. MPI’s shares rose 3.9 percent to 2.68 euros in Paris on Tuesday, valuing the company at 309 million euros. The stock is up 15 percent since Aug. 26, the day before the merger was announced. Maurel has a market capitalization of 533 million euros.

MPI holds holds cash equivalent to 2 euros a share and Seplat shares worth 1.21 euros each, while the proposed merger-ratio values MPI at 2.09 euros, according to Allan Gray, one of Africa’s biggest money managers. MPI is one of its top 10 holdings.

“We think Seplat is extremely cheap,” said Lapping. “With Seplat at fair value, the MPI value is over 4 euros per share.”

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