REG - Kistos PLC Serica Energy PLC - Proposed Combination - Revised Terms

Serica EnergyAnnouncement

25/07/2022 07:45

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RNS Number : 5783T  Kistos PLC  25 July 2022

 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE
OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A
VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION.

 

THIS IS AN ANNOUNCEMENT OF A POSSIBLE OFFER FALLING UNDER RULE 2.4 OF THE
UNITED KINGDOM ("UK") CITY CODE ON TAKEOVERS AND MERGERS (THE "TAKEOVER CODE")
AND DOES NOT CONSTITUTE AN ANNOUNCEMENT OF A FIRM INTENTION TO MAKE AN OFFER
UNDER RULE 2.7 OF THE TAKEOVER CODE. THERE CAN BE NO CERTAINTY THAT ANY OFFER
WILL BE MADE.

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF
REGULATION 2014/596/EU, WHICH IS PART OF UK DOMESTIC LAW PURSUANT TO THE
MARKET ABUSE (AMENDMENT) (EU EXIT) REGULATIONS (SI 2019/310) ("UK MAR").

 

FOR IMMEDIATE RELEASE

25 July 2022

 
Proposed Combination of Kistos plc with Serica Energy plc - Revised Combination Terms

 

Kistos plc ("Kistos") is today announcing an update to the proposed
combination with Serica Energy plc ("Serica") (the "Proposed Combination"),
first announced on 12 July 2022 (the "First Possible Offer Announcement").

 

The Board of Kistos confirms that on 22 July 2022 it wrote to the Board of
Serica setting out an update to the Proposed Combination, with Kistos revising
the combination terms for the entire issued and to be issued share capital of
Serica (the "Revised Combination Terms"), as set out below.

 

The Board of Serica rejected the Revised Combination Terms, with no rationale
given nor engagement with the Board of Kistos. The Board of Kistos, therefore,
in the interest of continued transparency has decided to announce these
Revised Combination Terms.

 

The Proposed Combination comprises a possible cash and share-for-share
exchange offer by Kistos for Serica. Under the Revised Combination Terms,
Kistos would offer for each Serica share:

·      0.4000 new Kistos shares; plus

·      cash of 213 pence, comprising:

o  a distribution of capital to Serica shareholders via a cash payment of 67
pence per share; and

o  cash consideration equivalent to 146 pence per Serica share.

 

Based on the closing price of 530 pence(i) per Kistos share on 22 July 2022
(the "Latest Practicable Date"), the Revised Combination Terms give an offer
value of 425 pence per Serica share, representing a premium of:

·      19% to the closing price of 357 pence i  per Serica share on the
Latest Practicable Date;

·      39% to the closing price of 305 pence(i) per Serica share on 11
July 2022, being the last business day before the First Possible Offer
Announcement; and

·      35% to the six-month volume weighted average price of 315
pence(i) per Serica share on the Latest Practicable Date.

 

The Revised Combination Terms represent an 11% increase to the headline offer
value as set out in the First Possible Offer Announcement ii .

 

Under the Revised Combination Terms, Serica shareholders would own
approximately 58% of the issued share capital of the combined business (the
"Combined Company"), in addition to receiving a significant cash component.

 

The Revised Combination Terms represent a reduced level of leverage in the
Combined Company by approximately £93 million relative to the terms presented
in the First Possible Offer Announcement, reflecting feedback from both the
Board of Serica and Serica's shareholders.

 

In addition, the Board of Kistos also believes that the Proposed Combination
would allow Serica shareholders to gain direct unhedged exposure to the
stronger continental European gas market through Kistos' Dutch gas assets.
Over the three months prior to the Latest Practicable Date, Dutch Title
Transfer Facility ("TTF") iii  prices have traded at an average premium of
above 50% over British National Balancing Point ("NBP") iv  prices and as at
the Latest Practicable Date TTF prices have a stronger forward outlook than
NBP, with the expected 2023 forward curve trading at a c.7% premium over
NBP v .

 

Governance

In contrast to the proposal by the Board of Serica on 1 July 2022, Kistos also
set out a framework for the governance of the Combined Company which included
a Board to reflect a balanced contribution from each of Kistos and Serica and
a proposal on the roles of Chairman and CEO.

 

Next Steps

Kistos continues to urge Serica shareholders to encourage the Board of Serica
to engage in constructive discussions with the Board of Kistos regarding the
Proposed Combination.

 

Important Takeover Code notes

 

As stated on 12 July 2022 in the First Possible Offer Announcement, in
accordance with Rule 2.6(a) of the Takeover Code, Kistos must, by not later
than 5.00 p.m. (London time) on 9 August 2022, either announce a firm
intention to make an offer for Serica in accordance with Rule 2.7 of the
Takeover Code (a "Kistos Firm Offer") or announce that it does not intend to
make an offer for Serica, in which case the announcement will be treated as a
statement to which Rule 2.8 of the Takeover Code applies. This deadline will
be extended only with the consent of Serica and the Panel on Takeovers and
Mergers (the "Panel") in accordance with Rule 2.6(c) of the Takeover Code.

 

Pursuant to Rule 2.5 of the Takeover Code, Kistos reserves the right to:

 

1.   Vary the form and/or mix of the consideration for the Proposed
Combination at its discretion; and

 

2.   Make an offer at any time at a lower value or on less favourable terms:

a.   with the recommendation or consent of the Board of Serica;

 

b.   if Serica announces, declares or pays any dividend or any other
distribution to shareholders (in which case Kistos will have the right to make
an equivalent reduction to the Revised Combination Terms);

 

c.   if a third party announces a firm intention to make an offer for Serica
on less favourable terms than the Revised Combination Terms; or

 

d.   following the announcement by Serica of a Rule 9 waiver pursuant to the
Takeover Code or a reverse takeover (as defined in the Takeover Code).

 

A further announcement will be made as appropriate. There can be no certainty
that a Kistos Firm Offer will be made.

 

Kistos confirms that this announcement is not being made with the consent of
Serica.

 

Other information

 

For the purposes of UK MAR, the person responsible for arranging release of
this Announcement on behalf of Kistos is Andrew Austin, Executive Chairman.

 

Terms used but not defined in this announcement shall have the meanings given
in the First Possible Offer Announcement.

 

 

Enquiries

 

 Kistos plc

Andrew Austin, Executive Chairman
                                                           c/o Camarco Tel: +44 (0) 20 3757 4983

 BofA Securities (Financial Adviser)                       Tel: +44 (0) 20 7628 1000

Julian Mylchreest

 Geoff Iles

 Tom Milner

 Ben Winstanley (Corporate Broking)

 Panmure Gordon (Nomad, Joint Corporate Broker)            Tel: +44 (0) 20 7886 2500

Richard Morecombe
 John Prior
 James Sinclair-Ford

 Berenberg (Joint Corporate Broker)                        Tel: +44 (0) 20 3207 7800

 Emily Morris

 Jack Botros

 Camarco (Public Relations Adviser)                        Tel: +44 (0) 20 3757 4983
 Billy Clegg

 Georgia Edmonds

 Hawthorn Advisors (Public Relations Adviser)              Tel: +44 (0) 203 745 4960

 Henry Lerwill

 Simon Woods

 

Orrick, Herrington & Sutcliffe (UK) LLP is acting as legal adviser to
Kistos in connection with the Proposed Combination.

 
Important information
 

This announcement is not intended to, and does not, constitute, represent or
form part of any offer, invitation or solicitation of an offer to purchase,
otherwise acquire, subscribe for, sell or otherwise dispose of any securities
or the solicitation of any vote or approval in any jurisdiction whether
pursuant to this announcement or otherwise.

 

The distribution of this announcement in jurisdictions outside the UK may be
restricted by law and therefore persons into whose possession this
announcement comes should inform themselves about, and observe, such
restrictions. Any failure to comply with the restrictions may constitute a
violation of the securities law of any such jurisdiction.

 

Merrill Lynch International ("BofA Securities"), which is authorised by the
Prudential Regulation Authority ("PRA") and regulated by the FCA and the PRA
in the UK, is acting as financial adviser exclusively for Kistos and for no
one else in connection with the matters referred to in this announcement and
will not be responsible to anyone other than Kistos for providing the
protections afforded to its clients or for providing advice in relation to the
matters referred to in this announcement. Neither BofA Securities, nor any of
its affiliates, owes or accepts any duty, liability or responsibility
whatsoever (whether direct or indirect, whether in contract, in tort, under
statute or otherwise) to any person who is not a client of BofA Securities in
connection with this announcement, any statement contained herein or
otherwise.

 

Panmure Gordon (UK) Limited ("Panmure Gordon"), which is authorised and
regulated by the FCA in the UK, is acting as nominated adviser and joint
corporate broker exclusively for Kistos and no one else in connection with the
matters referred to in this announcement and will not be responsible to anyone
other than Kistos for providing the protections afforded to its clients or for
providing advice in relation to matters referred to in this announcement.
Neither Panmure Gordon, nor any of its affiliates, owes or accepts any duty,
liability or responsibility whatsoever (whether direct or indirect, whether in
contract, in tort, under statute or otherwise) to any person who is not a
client of Panmure Gordon in connection with this announcement, any statement
contained herein or otherwise.

 

Joh. Berenberg, Gossler & Co. KG, London Branch ("Berenberg"), which is
authorised and regulated by the German Federal Financial Supervisory Authority
subject to limited regulation by the FCA in the UK, is acting as joint
corporate broker exclusively for Kistos and no one else in connection with the
matters referred to in this announcement and will not be responsible to anyone
other than Kistos for providing the protections afforded to its clients or for
providing advice in relation to matters referred to in this announcement.
Neither Berenberg, nor any of its affiliates, owes or accepts any duty,
liability or responsibility whatsoever (whether direct or indirect, whether in
contract, in tort, under statute or otherwise) to any person who is not a
client of Berenberg in connection with this announcement, any statement
contained herein or otherwise.

 

About Kistos

 

Kistos plc was established to acquire and manage companies in the energy
sector engaging in the energy transition trend. The Company has acquired Tulip
Oil Netherlands B.V., which has a portfolio of assets, including profitable,
highly cash generative natural gas production, plus appraisal and exploration
opportunities. In addition, Kistos acquired a 20% interest in the Greater
Laggan Area (GLA) from TotalEnergies in July 2022. The GLA includes four
producing fields and a development project.

 

Kistos is a low carbon intensity gas producer. The Q10-A gas field in the
Dutch North Sea (60% operated working interest) has recorded a Scope 1 carbon
emissions intensity of 13g CO2e/boe since inception. This compares to an
industry average of 22kg CO2/boe for gas extracted from the UK continental
shelf. The Q10-A normally unmanned installation is located approximately 20 km
from the Dutch shore. It is powered sustainably via wind and solar power and
is remotely operated, limiting offshore visits, which are conducted by boat.

 

Rule 2.4 information

 

In accordance with Rule 2.4(c)(iii) of the Takeover Code, Kistos confirms that
it is not aware of any dealings in Serica shares that would require a minimum
level, or particular form, of consideration that it would be obliged to offer
under Rule 6 or Rule 11 of the Takeover Code (as appropriate).

 

Rule 2.9 information

 

In accordance with Rule 2.9 of the Takeover Code, Kistos confirms that, as at
close of business on 22 July 2022 (being the business day prior to the date of
this announcement), its issued share capital consisted of 82,863,743 ordinary
shares of nominal value 10 pence each in the capital of Kistos which carry
voting rights of one vote per share and admitted to trading on AIM, the market
of that name operated by the London Stock Exchange with International
Securities Identification Number (ISIN) GB00BLF7NX68.

 
Disclosure requirements of the Takeover Code

 

Under Rule 8.3(a) of the Takeover Code, any person who is interested in 1% or
more of any class of relevant securities of an offeree company or of any
securities exchange offeror (being any offeror other than an offeror in
respect of which it has been announced that its offer is, or is likely to be,
solely in cash) must make an Opening Position Disclosure following the
commencement of the offer period and, if later, following the announcement in
which any securities exchange offeror is first identified. An Opening Position
Disclosure must contain details of the person's interests and short positions
in, and rights to subscribe for, any relevant securities of each of (i) the
offeree company and (ii) any securities exchange offeror(s). An Opening
Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no
later than 3.30 p.m. (London time) on the 10th business day following the
commencement of the offer period and, if appropriate, by no later than 3.30
p.m. (London time) on the 10th business day following the announcement in
which any securities exchange offeror is first identified. Relevant persons
who deal in the relevant securities of the offeree company or of a securities
exchange offeror prior to the deadline for making an Opening Position
Disclosure must instead make a Dealing Disclosure.

 

Under Rule 8.3(b) of the Takeover Code, any person who is, or becomes,
interested in 1% or more of any class of relevant securities of the offeree
company or of any securities exchange offeror must make a Dealing Disclosure
if the person deals in any relevant securities of the offeree company or of
any securities exchange offeror. A Dealing Disclosure must contain details of
the dealing concerned and of the person's interests and short positions in,
and rights to subscribe for, any relevant securities of each of (i) the
offeree company and (ii) any securities exchange offeror(s), save to the
extent that these details have previously been disclosed under Rule 8. A
Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no
later than 3.30 p.m. (London time) on the business day following the date of
the relevant dealing.

 

If two or more persons act together pursuant to an agreement or understanding,
whether formal or informal, to acquire or control an interest in relevant
securities of an offeree company or a securities exchange offeror, they will
be deemed to be a single person for the purpose of Rule 8.3.

 

Opening Position Disclosures must also be made by the offeree company and by
any offeror and Dealing Disclosures must also be made by the offeree company,
by any offeror and by any persons acting in concert with any of them (see
Rules 8.1, 8.2 and 8.4).

 

Details of the offeree and offeror companies in respect of whose relevant
securities Opening Position Disclosures and Dealing Disclosures must be made
can be found in the Disclosure Table on the Takeover Panel's website at
www.thetakeoverpanel.org.uk (http://www.thetakeoverpanel.org.uk/) ,
(http://www.thetakeoverpanel.org.uk/) including details of the number of
relevant securities in issue, when the offer period commenced and when any
offeror was first identified. You should contact the Panel's Market
Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether
you are required to make an Opening Position Disclosure or a Dealing
Disclosure.

 

Website publication

 

In accordance with Rule 26.1 of the Takeover Code, a copy of this announcement
will be made available, subject to certain restrictions relating to persons
resident in restricted jurisdictions, on Kistos' website (www.kistosplc.com)
by no later than noon (London time) on the business day following this
announcement. The content of the website referred to in this announcement is
not incorporated into and does not form part of this announcement.

 

 i  Source: Bloomberg as of 22 July 2022

 

 ii  Increase in headline offer value per the Revised Combination Terms as at
the Latest Practicable Date (22 July 2022) compared with the headline offer
value as set out in the First Possible Offer Announcement (data as of 11 July
2022).

 iii  The Title Transfer Facility ("TTF") represents a virtual market in the
Netherlands for virtual trading of futures, physical and exchange trades of
natural gas. The Dutch TTF is an important trading place where parties can
exchange gas each other, and its tariffs have become important reference for
the rest of Europe

 iv  The National Balancing Point ("NBP") represents a virtual point of
delivery within the National Transmission System of the United Kingdom at
which the balancing of deliveries into and out of the National Transmission
System is deemed to take place under the Uniform Network Code. The UK NBP gas
market is Europe's longest-established spot-traded natural gas market, and its
price is widely used as an indicator for Europe's wholesale gas market

 

 v  Source: FactSet as of 22 July 2022

Note: Daily TTF and NBP historical spot prices trading on EEX converted in
€/MWh using daily average GBP/EUR exchange rate. Forward spread based on TTF
and NBP forward contracts trading on ICE Endex ("NDEX") and ICE Futures Europe
("IFEU") respectively. Forward premium calculated as the average of the 2023
TTF monthly contracts divided by the average of the 2023 NBP monthly contracts

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