Pict merger with rival Premier boosts shares

BY TOM STEVENSON Shares in Pict Petroleum soared yesterday after Amerada Hess confirmed it had brokered a merger between the North Sea oil explorer in which it holds a 48 per cent stake and Premier Consolidated, its larger rival.

Following the merger, Amerada will have a 25 per cent stake in the enlarged group which it has promised not to sell or increase for two years.

Premier is offering to buy out Pict at an equivalent of 198p a share, a 40 per cent premium to its share price in December before the talks were first announced and more than the market had been led to expect.

The deal offers Pict shareholders 31 Premier shares for every four Pict. Once the two are put together Amerada will inject a further £20m through a share subscription to take its holding to a maximum quarter of the enlarged group.

Premier's shares closed 1p lower at 25p despite Amerada agreeing to subscribe for its new shares at 33p. Pict jumped from 157p to 188p. Pict's board recommended the offer and most of its senior staff will transfer to the new group.

Analysts warmed to the deal, which is seen as providing Pict shareholders with an unexpectedly high exit price and Premier with access to good quality British producing assets and more financial stability.

Iain Reid, at SG Warburg, said Premier would be a more boring company than when it was run by the larger-than-life Texan Roland Shaw, who was ousted last August, but a more solid one. He thought the appointment of Pict's John Lander to the Premier board was a bonus for the new group.

Francis Gugen, Amerada's finance director, says the main attraction of the deal is the balance the new group will have between Pict's cash-producing North Sea assets and Premier's potentially exciting Far Eastern and Pakistani exploration prospects.

Pict is also biased towards oil production while Premier is stronger in gas. Pict's management has a good record of finding oil in the North Sea while Premier is a successful operator of fields in Britain and overseas.

Following the merger, Premier's board said it expected to resume dividend payments. Neither company has made a payout in the past five years.

John Lander, Pict's managing director, said that the price achieved was pleasing and reflected the company's assets better than the 141p the shares traded at in December.

Premier said then that it did not expect to offer much more than the prevailing price.