Merger in the Works for Petroceltic and Melrose

Two UK-based independents are set to merge, Petroceltic International and Melrose Resources. The boards of both companies reached agreement on the terms of a recommended merger. The merger will create a regionally focused North Africa, Mediterranean, and Black Sea independent oil and gas company and will have a balanced and diversified portfolio comprising production, development, and high impact exploration assets.

Petroceltic holds assets in Algeria, Italy, and the Kurdistan region of Iraq, while Melrose holds assets in Egypt, Bulgaria, France, and Romania. The enlarged group will have combined 2P reserves of 84 mmboe, 2C resources of 357 mmboe and unrisked prospective resources of 1,365 mmboe in the North Africa, Mediterranean, and Black Sea regions.

Under the terms of the merger, Melrose Shareholders will receive: 17.6 new Petroceltic shares for every Melrose Share. In addition, a special dividend of 4.7 pence per Melrose share will be paid by Melrose to Melrose shareholders who are on Melrose's register of members at the Reduction Record Time within 14 days of the effective date.

Following the merger becoming effective, based on the Merger Ratio of 17.6 new Petroceltic shares for every Melrose share held: existing Melrose shareholders will hold 46% of the enlarged company; and existing Petroceltic Shareholders will hold 54% (in each case on an undiluted basis).

The merger price for Melrose values it at approximately £165.0 million and represents a premium of approximately 6.2% to Melrose's closing price of 135.5 pence on August 16

Commenting on the Merger, Robert Adair, executive chairman of Melrose said: “The merger represents an exciting opportunity for all shareholders and will create an E&P company with a strong regional focus and the scale to compete successfully in this arena. The Enlarged Group will have a strong, highly experienced management team with a good blend of operating skills to maximise the value of these assets and pursue additional business development opportunities. The Melrose Board believes that the Merger will provide access to material resources in a leading gas development and an exposure to a more diverse exploration portfolio, enhancing the longer term outlook for the business.”

Commenting on the Merger, Brian O'Cathain, chief executive of Petroceltic said: “A combination with Melrose is a compelling opportunity to create a regionally focused company, balanced between production, development and exploration. The benefits extend beyond the improved risk profile to the combined entity's enhanced strategic and funding options allowing the potential value of the assets of both companies to be realized for their shareholders.”