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Oil companies announce progressive merger

Category: Scotland Business News — Paul Morgan on August 24, 2012

A Scottish oil company and an Irish rival are to merge, creating a combined group which will bring together expertise and resources.

The deal between Edinburgh-based Melrose Resources and Dublin-based Petroceltic was announced last week. In the agreement, Petroceltic’s shareholders will have a controlling stake of 54%, whilst Melrose shareholders take the remaining 46%. Melrose shareholders will receive 17.6 Petroceltic shares for every share owned. The new company will go under the name Petroceltic.

There has been no announcement as to whether any redundancies will come out of the deal, with Melrose’s chief executive saying that both Dublin and Edinburgh sites will be kept open.

This will be good news but also be converse to the way many other acquisitions and mergers are completed. It is a common trend that duplicate positions are made redundant – something that many workers at Scottish companies that have been subject to takeovers have experienced.

Some may argue that it is a ripe time for taking opportunities, however. With a challenging economy still effective, those firms with robust financial strategies can invoke expansion plans swiftly. Many are choosing to do this through invoice factoring, with Edinburgh factoring companies increasingly in demand.

The merger between Melrose and Petroceltic will create great opportunities for the new company. Together, it will control about 430m barrels or equivalent (BoE) of oil reserves. The new group will also have funding to expand, with a £190m loan facility. Many companies are reducing their debt commitments though, once again switching to invoice-based facilities such as factoring.

For the new company, however, access to 400m plus BoE, 305m of which are in undeveloped fields, the furnishing of the debt should be achievable.

'Disclaimer: The information contained in these articles is of a general nature and no assurance of accuracy can be given. It is not a substitute for specific professional advice in your own circumstances. No action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a consequence of the material can be accepted by the authors or the firm.

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