A potential merger between North Sea gas producers Kistos (KIST:AIM) and its larger peer Serica Energy (SQZ:AIM) could create a FTSE 250 outfit with wider strategic importance.

Russia’s invasion of Ukraine and its recent renewed threat to cut off gas supplies to Europe, plus the role of gas as a bridge between more polluting fossil fuels and renewables as countries advance their net zero ambitions, means a combined Kistos/Serica would occupy a prominent industry position.

Kistos revealed on 12 July that it had first entered discussions with Serica over a merger in May – overtures which were rebuffed.

Serica accepted the strategic logic of the deal and came back with an offer of its own at the beginning of July which, in turn, was rejected by Kistos.

Kistos’ latest cash and shares offer for Serica equates to £1 billion or 382p per share. This is only a 22% premium to Serica’s six-month average share price prior to the announcement of an approach and may need to be sweetened if the deal is to get over the line.

If Kistos is successful it is plotting a move to the Main Market where, at current market valuations, the combined entity would comfortably qualify for the FTSE 250 index.

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