Enterprise and Lasmo abandon merger talks

ENTERPRISE OIL and Lasmo yesterday abandoned merger talks vowing that each had better prospects remaining as independent oil exploration companies.

In a statement issued after the markets had closed, the two companies said: "Having considered the possible merits of a merger, and the contributions that each company would have made to the combination, both companies have concluded that they are better placed to add value independently."

Lasmo fought off a hostile pounds 1.6bn bid from Enterprise five years ago. A merger would have created one of the biggest independent oil exploration groups in the sector with a market capitalisation of just under pounds 2bn.

But after three months of negotiations, it was decided not to go ahead with a merger because, as one source put it, "the risks outweighed the benefits".

There would have been cost savings of about pounds 20m but this was not sufficient to justify the risks involved in putting two different production and exploration portfolios and management styles together. There were also concerns about the disposal programme that would have been necessary and whether the assets would have fetched an acceptable price.

Although Enterprise initiated the talks and was always the keener of the two on a merger, Pierre Jungels, its chief executive, would not have had a role in the enlarged group. Joe Darby, the chief executive of Lasmo, would have taken on that post while its chairman would have been the Enterprise chairman, Sir Graham Hearne.

Mr Jungels said: "When we looked at the overall package it did not stack up."