South African Firm opposes MAU and MPI merger

South African investment management firm Allan Gray says that is against a proposed merger between Maurel & Prom (MAU) and MPI, two oil companies listed in France.

MPI and MAU have some common shareholders as MAU unbundled MPI in late 2011.

The South African firm, whose clients own 5.9 percent of MPI, believes the deal will not be in the best interest of minority shareholders, and will not unlock the fair value of their holdings.

“MAU is offering cash of EUR0.45 and half an MAU share, which is well below the EUR3.30 MPI holds in cash and undervalued marketable securities,” says Andrew Lapping, a fund manager at Allan Gray.

MAU, an energy exploration company with a market cap of EUR532.4 million, has found itself in financial difficulties, with net debt of EUR636 million.

The company says the merger will create cost synergies amidst a pressurised economic climate and the potential to build a European champion.

“We agree that MPI is a relatively small player and that the merger will save costs, but we are concerned that the deal will see MPI’s cash reserves used to alleviate MAU’s debt problem,” says Lapping.

“It is important to seek the best solution and protect value for all shareholders.  The current merger proposal significantly undervalues MPI’s assets and is clearly not in the interests of MPI minorities,” concludes Lapping.