Serica Energy has rejected a revised merger proposal from energy investment firm Kistos at a valuation of nearly 1.2 billion pounds ($1.4 billion), saying it undervalues the British oil and gas group.
Kistos on Monday disclosed details of the proposal, which comprised a cash-and-stock offer of 425 pence per share, representing a 19% premium to Serica's last closing price.
It also proposed that Tony Craven Walker, Serica's chairman, take on the same role at the combined company and that Kistos Chairman Andrew Austin assumes the role of chief executive.
The offer "results in Serica shareholders funding much of the purported premium themselves", said Serica, which produces about 5% of Britain's gas supplies.
"The (Serica) board ... will not recommend any deal on terms it believes are unattractive to its shareholders and wider stakeholders."
Stifel analyst Chris Wheaton also said Serica shareholders should not accept the proposal and "instead wait for results of the North Eigg exploration well, which could add over 250p per share to our valuation".
Kistos, which has a market value of 439.2 million pounds compared with Serica's 970.8 million, had previously made public an offer of 382p per Serica share, which was rejected by the company's board in June.
Serica then approached Kistos on July 1 with a cash-and-stock offer of 483p per Kistos share, which was rejected by the investment company's board.
Monday's announcement comes as a blow to Kistos as it seeks to strengthen its foothold in the North Sea.
Shares in Kistos fell 0.9% to 525p while Serica gained 1.4% to 362p in morning trade.
($1 = 0.8356 pounds)
(Reuetrs - Reporting by Eva Mathews in Bengaluru; Additional reporting by Shadia Nasralla; Editing by Sherry Jacob-Phillips, David Holmes and David Goodman)