Ratio raises Pharos Energy bid to 33.75p as Serica battle intensifies

Ratio Petroleum Energy raised its takeover bid for Pharos Energy to about £146.4 million ($196.97 million) on Friday, outbidding rival producer Serica Energy and winning back the Pharos board's recommendation for the acquisition.

"The increased offer provides Pharos shareholders with superior value than under the Serica offer," the boards of Ratio and Pharos said in a joint statement, citing Ratio's experience securing regulatory consents across seven international regimes as providing greater certainty and deliverability.

Under the revised terms, Pharos shareholders receive 28.8183 pence in cash per share plus a 4.0 pence special dividend from existing cash resources, totaling 32.8183 pence. Combined with the FY25 final dividend of 0.9317 pence already paid on 17 July, the aggregate value reaches 33.75 pence per share — a 29.2 percent premium to the 25.4 pence closing price on 23 June, the last trading day before the original offer was announced.

The revised bid values Pharos at approximately £146.4 million and edges out Serica's competing offer by 0.5 percent on the equivalent cash-plus-dividend basis. Ratio has secured irrevocable undertakings covering 41.76 percent of Pharos shares, including commitments from holders of 19.55 percent that remain binding regardless of any higher competing offer from a third party.

The contest began on 24 June when Ratio and Pharos agreed to an original acquisition worth up to 28.0 pence per share, comprising 23.0683 pence in cash plus a 4.0 pence special dividend. Serica Energy entered the fray on 26 July with a competing offer, prompting the Pharos board to switch its recommendation. Ratio's response, announced on 7 August, restores the board's backing.

The Pharos directors, advised by Rothschild & Co, unanimously recommend shareholders vote in favor of the scheme at the Court Meeting and General Meeting. They have withdrawn their recommendation of the Serica offer and advised shareholders to take no further action on it. The meetings, originally scheduled for 17 August, will be adjourned to allow shareholders more time to consider the revised terms.

Irrevocable undertakings stack the deck

Ratio's irrevocable undertakings include commitments from Blue Albacore Business Ltd, Ettore Contini, Palamos Limited and the Ed Story Estate covering 81.4 million shares (19.55 percent) that remain binding even against a higher offer. Undertakings from Bradley Radoff and the Radoff Family Foundation covering 90.1 million shares (21.63 percent) become binding after 11 August unless a third party announces an offer at least 15 percent higher and Ratio fails to match it within 10 business days. Aberforth Partners' undertaking in favor of the Serica offer lapses as a result of the revised Ratio bid.

The acquisition remains subject to regulatory approvals and court sanction, with the Long Stop Date extended to 15 July 2027. The cash consideration is backed by an increased irrevocable letter of credit from Israel Discount Bank, arranged by Ratio Energies. Shore Capital serves as financial adviser to Ratio, while Rothschild & Co advises the Pharos directors.

The deal reflects continued consolidation in the UK North Sea oil and gas sector, where mid-sized producers are seeking scale and diversification. Serica Energy, which had sought to use the acquisition to increase scale and diversify its portfolio, must now decide whether to raise its own offer or walk away. Ratio's binding undertakings from nearly 42 percent of shareholders raise the bar for any counterbid, and the 15 percent improvement threshold for the Radoff undertakings creates a steep hurdle for Serica to clear.

This article is for informational purposes only and does not constitute investment advice.