Gaelic backs merger terms

Gaelic Resources has completed its merger talks with the small British oil group Desire Petroleum and has recommended an offer that will value the merged entity at £12.8 million sterling (€19.4 million).

Under the terms of the merger, Gaelic shareholders will own 51.8 per cent of the merged group with Desire holding 48.2 per cent.

The merger is, in effect, a reverse takeover of Desire by Gaelic although the merger is being structured in the form of a Desire offer for Gaelic on the basis of one Desire share for every 18 Gaelic shares.

Desire is listed on the AIM market in London while Gaelic is listed on the Exploration Securities Market in Dublin.

The merger has been recommended by both boards of directors even though the terms of the deal have shifted significantly towards Desire since talks began in June.

At that time, Desire shares were trading at 30.5p sterling and the one-for-18 offer valued Gaelic shares at 1.69p.

Since then, Desire shares have fallen to 24p, but the terms of the merger have not changed and the one-for-18 offer values Gaelic shares at 1.33p.

Based on Desire's current price of 24p, the merged company will be worth £12.8 million when it begins trading on the AIM market.

Desire was formed in 1996 and its main interests are offshore the Falkland Islands where it has been involved in two wells.

While those wells have indicated oil, the fall in oil prices had led exploration companies to withdraw from the area until prices recover. That setback led Desire to look at other operations.

Gaelic's main interest is gas exploration in Portugal, both onshore and offshore. Gaelic's second well in its licence area produced gas and the partners in the consortium are now considering an appraisal programme involving several wells.

Gaelic has warned, however, that if the merger with Desire does not go ahead, it will have to raise funds for this appraisal programme by either farming out some of its interest or by raising cash through a share issue.