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Kuwait Energy in merger talks with London-listed SOCO International

Reuters  |  DUBAI 

By Davide Barbuscia

(Reuters) - International, an and gas exploration and production company listed on the Stock Exchange, said on Monday it was evaluating with and gas firm

Its statement confirmed report earlier on Monday that the two companies were in talks.

would provide way for the to go public after it failed last year to complete an initial public offer of its shares on the exchange, through which it hoped to raise about $150 million.

SOCO, which has market capitalisation of about $500 million, said discussions with Energy's newly constituted board were preliminary and no deal terms had been agreed.

"confirms that, in the context of its stated objective to strategically reshape its business and grow its portfolio, it is evaluating potential of equals with Energy," the company said in statement issued via the Stock Exchange.

declined to comment on the discussions.

SOCO's shares rose as much as 15 percent on of talks and were up 9.9 percent at 123.4 pence at 1224 GMT.

has assets in Iraq, Oman, and has very different geographic exposure, with interests in Vietnam, and but no major assets in the

Thomas Streater, at in Dubai, said the could benefit both companies.

"With volatile prices, it makes sense for small companies to merge as getting bigger scale gives them balance sheet to face volatility. would get portfolio of low cost, attractive assets, and for it would be way to monetise some of their holdings," he said.

Streater added that Energy's portfolio was quite attractive "but assets are in so straight away from an IPO perspective it's seen as too risky. With the merger, the company's shareholders will probably get stock, and then they'll be able to sell at later stage."

had $132 million in cash as of September last year. had $43 million in cash at the end of September.

The potential would be "of equals, two companies with very similar size and operations, but different geographic exposures", said one of the sources, who did not want to be named because the discussions are private.

"The difference is that has slightly more mature or developed asset base and is in stronger liquidity position. has less mature asset base with huge potential, but it is more leveraged and needs to fund substantial capital expenditure requirement to realise the potential."

had appointed Numis and BofA Merrill Lynch as global coordinators and joint bookrunners for last year's planned IPO, with as co-bookrunner.

The Kuwaiti firm announced last June that it had not been able to complete the IPO. It did not give reason, but said that in light of positive feedback from potential investors, it remained committed to obtaining listing and continued to explore its options.

In December, board shake-up included the resignation of the company's and the appointment of six new board directors.

also announced last month that it had agreed to extend the maturity of the principal repayment of $155 million convertible loan due in November 2017, partially held by group

(Editing by and Susan Fenton)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, January 08 2018. 18:53 IST