Melrose and Petroceltic to Merge

LONDON -- Melrose Resources (LSE: MRS.L  ) and Petroceltic International (LSE: PCI.L  ) have announced that the two companies are to merge.

Melrose Resources is an oil and gas exploration, development and production company with interests in Egypt, Bulgaria, Romania, the United States, Turkey and France. Petroceltic International is an upstream oil and gas exploration and production company, which operates in four segments: Algeria, Kurdistan Region of Iraq, Italy and Ireland. Ireland is Petroceltic's only income stream.

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 to Melrose shareholders.

Following the merger becoming effective, based on the merger ratio outlined above, existing Melrose shareholders will hold 46% of the enlarged company and existing Petroceltic shareholders will hold 54%.

The merger values each Melrose share at 143.9 pence, and the entire issued share capital of Melrose at approximately 165 pounds. The share price of Melrose rose on trading this morning by 4.23 pence (3.12%) to 139.73 pence.

The enlarged group will be boosted by a new $300 million facility provided by HSBC. The aim of the merger is that the increased financial muscle will enable more controlled growth including an active exploration drilling campaign and participation in the future development of Petroceltic's Ain Tsila gas development in Algeria. With this in mind, no dividend payments have been earmarked for the foreseeable future.

Commenting on the merger, executive chairman of Melrose Robert Adair 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.

Brian O'Cathain, chief executive of Petroceltic, had this to say:

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 realised for their shareholders.

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