Serica Energy rejected a revised merger proposal valuing it at nearly 1.2 billion pounds (US$1.4 billion) from energy investment firm Kistos, saying it undervalues the British oil and gas group’s core assets.

Kistos on July 25 disclosed details of the proposal, which comprised a cash-and-stock offer of 425 pence per share, representing a 19% premium to Serica’s last closing price.

It also proposed that Tony Craven Walker, Serica’s chairman, take on the same role at the combined firm, and that Andrew Austin, Kistos’ chairman, assume the role of CEO.

The offer “results in Serica shareholders funding much of the purported premium themselves: Kistos' market capitalization is significantly smaller than Serica’s,” Serica, which produces around 5% of Britain's gas supplies, said.

“The [Serica] board reiterates its position that it will not recommend any deal on terms which it believes are unattractive to its shareholders and wider stakeholders.”

Kistos, which has a market value of 439.2 million pounds compared with Serica’s 970.8 million, had earlier made public an offer of 382p for each share of Serica, which was rejected by the firm’s board in June.

Serica then approached Kistos on July 1 with a cash-and-stock offer of 483p per Kistos share, which was rejected by the investment company’s board.

The July 25 announcement comes as a blow to Kistos as it looks to strengthen its foothold in the North Sea.

Shares in Kistos fell 2.8%, while Serica was trading 1.8% higher.

(US$1 = 0.8356 pounds)