FT : Oligarchs snap up London property

Oligarchs snap up London property

Wealthy Russians and Ukrainians are trying to shift more cash into London property, say estate agents, amid indications that eastern European oligarchs are using the capital’s housing market to conceal their assets from international sanctions. Property advisers JLL estimates that Russian capital flight could quadruple year-on-year. Adam Challis, its head of residential research, said: "Wealthy Russians and Ukrainians have been identifying safe locations for wealth preservation since the start of the year." Russian buyers spent about £180m in the London housing market in 2013, according to estimates from Savills. Many agents expect this year’s figure to be sharply higher, as the current wave of prospective buyers finalise their purchases. Roarie Scarisbrick, director of the buying agent Property Vision, said: "A lot of the Russian clients we have been talking to over the last couple of years, who had just been considering buying here, have stepped up their plans and are getting on with it." Mr Challis said the Treasury had been "surprised by the number of property holders that have retained ownership structures through a corporate vehicle". Despite a recent tax crackdown by George Osborne, the chancellor, many eastern Europeans still buy their London homes through a company structure to preserve their anonymity, according to tax advisers and housing market agents. This use of offshore companies makes property assets harder for any international financial sanctions regime to target. Charles McDowell, a property finder for wealthy buyers, said buying through a company structure was popular because "should there be any freezing of assets or something similar, they are as protected as they can be". "We have certainly seen an upturn in Russian buyers as well as eastern Europeans generally," he said. "Russians in particular are nervous about how any escalation in sanctions might affect them." Michael Morris, a partner in Channel Islands law firm Collas Crill who advises rich international home buyers, said they purchase through a company because "the Land Registry is a public register and if you are extremely wealthy you may not want people to know where your home is". David Cameron wants to remove the "cloak of secrecy" hiding corruption and tax evasion, and the government has just announced details of a new public register of beneficial interests. The rules aim to force UK companies to reveal the names of their owners, but experts are doubtful that they will be effective. Gavin Hayman, director of campaigns at Global Witness, an anti-corruption group, said the government’s new register would "help a bit" with targeting sanctions but would not be the complete solution because ownership could still be obscured using offshore companies. He said it would be worth exploring the case for requiring the Land Registry to list the beneficial ownership of property. Bill Dodwell, of Deloitte, the professional services group, said: "The general sense is that if complete privacy is important you wouldn’t be using a UK company in the first place." Many property-owning companies are based in tax havens, although these have a relatively good record for collecting information on corporate ownership. But nearly 2m companies are formed each year in the US, almost always without obtaining the names of the people who will control them. Property agents are required to perform additional anti-money laundering checks on "politically-exposed" people, including those with close links to foreign governments, although the authorities have long been concerned about the difficulty of identifying potentially suspect real estate transactions. George Osborne launched an initial crackdown on homes owned through companies in 2012, introducing a tax on dwellings held in a corporate envelope. It has been highly successful, raising five times the sum the government expected. Mr Osborne further tightened the tax rules on properties owned through companies in this year’s Budget. Richard White, head of UK real estate at advisory firm KPMG, said: "The tax law changes are based on an assumption that such structures are solely there for tax avoidance purposes. "However, there can be other, non-tax related reasons for high-profile individuals acquiring their ­private property through companies, such as the desire to preserve anonymity. This can often be as a result of the political sentiment in their country of origin, which we frequently see with Russian and ­eastern European investors." Russians and eastern Europeans are particularly keen on buying large family homes on the Bishops Avenue in Highgate, north London, which is popularly known as "billionaires’ row". Jeremy Gee, a director of estate agent Glentree, specialises in selling homes in the area and is currently house-hunting for two "very serious buyers" arriving in London from Ukraine and looking to settle their families here quickly. Most Russian and Ukrainian owners of London homes hold them through companies in order to keep their identities private, Mr Gee said.

WSJ : BP: Disconnecting From the Operator


BP: Disconnecting From the Operator

There is little point in acting large and in charge if someone else is actually calling the shots.
Typically, a large oil or gas field will be owned by several partners, but only one operates it. So the behemoths of the oil and gas industry generally prefer to control and operate their main assets, rather than hand over the reins to a rival. Indeed, as competing oil-services firms and state-backed national oil companies have muscled in, management of complex energy projects has been touted as a raison d'être for the big oil companies.
But one in particular looks less like a master of its own destiny these days: BP.
The U.K. oil company derived only 30% of last year's output, after paying royalties, from assets in which it was the operator, according to data from sector consultant Rystad Energy. That is well shy of peers such as Chevron, at 74%, and Royal Dutch Shell, at 59%. It also is less than at Exxon Mobil, Total and Eni, which each got about 45% of their output from operated assets.
One big reason for this is Russia. A 20% stake in Kremlin-controlled Rosneft accounts for about one-third of BP's production. Though it claims some sway over Rosneft's operations, including BP Chief Executive Bob Dudley's seat on the Russian company's board, recent tensions around Ukraine have reawakened concerns about BP's exposure. Excluding the Rosneft stake, BP's share of production that it operates would be much closer to that of its rivals, though still below the average.
Another factor is the legacy of 2010's Macondo disaster and, in particular, BP's $38 billion in asset sales to help foot the bill. Indeed, it recently sold stakes in four small fields it operated in Alaska, a company stronghold for decades.
BP's overall production has fallen 20% since 2009, hitting 3.23 million barrels of oil equivalent a day last year. Disposals account for about two-thirds of the drop. While BP shed both operated and nonoperated positions, its Russian production has become a more significant chunk of total output.
The big oil companies can still exert behind-the-scenes influence over nonoperated projects. And BP's sale of smaller, more mature assets is in keeping with a broader industry shift of focusing on more profitable barrels, rather than growth at any price.
But BP has some catching up to do. Rystad forecasts a ramp-up in operated production, notably in the North Sea and North America, could mean that by 2020 BP's control over its output is in line with peers like Total and Eni.
The catch is that this costs money, at a time when oil and gas companies are coming under pressure from shareholders to reduce investment budgets.
BP's budget hasn't blown out in recent years like at some rivals. So it hasn't pledged cuts of its own. Yearly capital expenditures will stay between $24 billion and $26 billion to 2018. But Rystad estimates that, to hit the consultant's forecasts, BP's spending would need to rise to close to $30 billion by 2020, with substantial spending on discoveries BP has yet to sanction for development.
After years of big budgets, investors are rewarding big oil companies that can show self-control. For BP, however, a little spending may be the cost of regaining control of another kind.

>>> What to look at this week end - 26th & 27th Of april 2014


Macro
- Germany’s Schaeuble Says Tax Cuts Are Possible, Spiegel Reports
- ECB’s Nouy Expects This Year’s Bank Stress Tests Will Suffice
- Dutch Central Bank Chief Knot Isn’t in Favor of European QE: NRC

Keep an eye on :
- ALO FP : GE Board confirmed they have made binding offer, Siemens said to be willing to match, beat GE offer, GE Said to Have Done Due Diligence, Signed NDA on Alstom, GE Said to Emphasize Deal Certainty, Less Overlap in Alstom Bid
- ALO FP : Alstom Seeking a trading halt until Wednesday; To continue and deepen its strategic review, Will make further announcements no later than Wednesday morning. - France Pres Hollande gathers ministers for a cabinet meeting to discuss the impact of Alstom bids by Siemens and GE on jobs and other considerations
- BLT LN : X2 in talks regarding bid for BHP Billiton’s thermal coal business; lining up USD 8bn warchest via JPMorgan
- EI FP : Coastal Contacts Inc. Receives Competition Act clearance for acquisition by Essilor Int'l
- G IM : Generali Has Received Three Offers for BSI Group, Sole Reports
- MRK GY : Merck Said Near Consumer Unit Sale for $14 Billion: Reuters
- NOVN VX : Novartis CEO Planning More Acquisitions, Co. will invest more to expand pharmaceuticals, eyecare products, genericsSchweiz am Sonntag
- PMO LN : Premier Oil Rejected Two Approaches by Ophir Energy, Times Says
- PUB FP : Omnicom, Publicis Power Struggle Said to Threaten Deal: WSJ Link
- TLW LN +ve article in the Barron's, 25% Upside

FT : Encouraging signs that 2014 M&A spree is the real deal

Encouraging signs that 2014 M&A spree is the real deal

Wall Street Illustrations©Bloomberg
The M&A boom of 2007 was, with hindsight, the final flourish of a financial system that had become chronically over exuberant. Corporate confidence, skilfully marshalled by dealmakers, pushed the value of global M&A to $1.4tn during the first four months of that year – far more than in any year before or since, until now.
The past month has been dominated by claims, from Wall Street to the City of London and beyond, that dealmaking is back. The numbers go some way to corroborating that: global M&A is at about $1.2tn for the year to date, the highest level since 2007 and 42 per cent up on a year ago.

But beneath the headline numbers, there has been a fundamental shift in the way deals are being done.
The most telling change – and one that bankers argue makes this a very different market to 2007 – is the way in which deals are being financed.
One of the hallmarks of 2007 was the use of cash to fund deals, as companies borrowed billions to fulfil their M&A ambitions. Deals where only cash was used accounted for 76 per cent of the total market during the first four months. This year, all-cash deals account for 47 per cent of the market, the lowest level since 2001. In contrast, deals purely paid for with stock have accounted for 19 per cent of M&A this year compared to 8 per cent in 2007.
At the same time, there has been a surge in the number of transactions being financed with a combination of cash and stock. Usually a small part of the overall market, cash-and-stock deals have accounted for a third of all M&A in the year to date, almost 10 percentage points higher than any previous year on record and well above the 14 per cent in 2007.
The increased use of stock in deals reflects the stellar re-rating of equity value that most companies have enjoyed during the past year. The trend, which also creates an artificially high overall number for the value of M&A activity, was encapsulated in Facebook’s $19bn takeover of WhatsApp, the mobile-messaging group.
“I don’t see the “frothiness” in the current market that 2007 had, despite the recent spate of deals,” says Paul Parker, head of global M&A at Barclays. “This market is characterised by large, well-capitalised companies doing large, strategic, synergistic deals for cash and stock”.
FX de Mallmann, global co-head of Goldman Sachs’ consumer retail group, adds: “2007 was a peak year at the end of a run up in transaction volume, executed in a strong capital markets environment and in many cases with the use of meaningful leverage. Now, we are at year six since the beginning of the financial crisis. The uncertainty of the past period meant that the risks attached to launching significant transactions were perceived as too high.”
Most of what is happening now is not new; a number of these transactions have been in the drawer for a while, waiting for the stars to align
- FX de Mallmann, Goldman Sachs
The notion that the deals being executed presently are more rational or value-creating than those of previous M&A cycles is one that bankers could be forgiven for promulgating. However, investors, too, appear united in the belief that the recent run of dealmaking, while large in absolute value terms, is more measured than past booms.
Throughout the past 20 years, one factor has been almost universally true when it comes to M&A: in boom periods and in less excited times, the share prices of companies making acquisitions decline on the news of the deal.
In the past two years, that trend has started to change, albeit in a period of modest activity. In 2014, though, the share prices of acquiring companies have gained 4.4 per cent within a day of a deal being announced, the highest post-announcement increase since Dealogic began tracking the data in 1995.
One explanation is that many of the transactions being completed are not deals hastily assembled under the glow of returning confidence.
“Most of what is happening now is not new; a number of these transactions have been in the drawer for a while, waiting for the stars to align,” says Mr de Mallmann, who last month helped Holcim launch its $40bn merger with rival cement maker Lafarge. “Most of the ingredients for a turnround in M&A activity have been there for some time.
“The missing piece was CEO confidence – but that has come back too, on the back of a better macro economic outlook and a significant re-rating of stock prices.”
Mr Parker, who is working on Comcast’s $45bn merger with Time Warner Cable, adds: “[The market] is coming back, but there is still reticence out there. The actual numbers of deals are down, even with up volumes, so the pace of calls to do deals is clearly less than it was in 2007.”
The ticket size of deals in 2014 is also higher than normal. So far this year, there have been 13 M&A transactions worth in excess of $10bn, representing a third of the overall market.
Since 1995, so-called mega-deals have accounted for an average of 22 per cent of all deals. The larger deals are a consequence of a consolidation flurry in the pharmaceutical and telecom industries, both of which have scores of very large companies
Some bankers suggest that the recent hype over a return to boom times is overplayed, however.
“What’s different in 2014 compared to 2007 is that there has been a significant divergence between M&A and the equity markets over the past few years, which are usually highly correlated,” says Bob Eatroff, co-head of US M&A at Morgan Stanley. “The equity markets rose over 30 per cent last year, while M&A was flat. This year’s level of M&A activity is just a reversion to the mean.”

FT : Siemens intervenes in General Electric’s bid to acquire Alstom

Siemens intervenes in General Electric’s bid to acquire Alstom

The French government has postponed a meeting with General Electric to discuss the US manufacturer’s bid for French rival Alstom’s energy business, saying that it wants time to examine a separate proposal from Germany’s Siemens.
In a letter addressed to Alstom chief executive Patrick Kron over the weekend, Siemens proposed the creation of two new European industrial champions – one in energy under Siemens’ leadership and another in transport, which Alstom would own.

The non-binding asset-swap proposal, a copy of which was obtained by the Financial Times, represents a dramatic intervention by Siemens to prevent its great rival GE securing a much bigger footprint in Europe.
Siemens proposes acquiring Alstom’s thermal power, renewable power and grid divisions. In return it would inject its high-speed train and locomotive business into Alstom, as well as providing a “significant cash contribution” to Alstom shareholders. Siemens considers Alstom’s energy assets to have an enterprise value of €10bn-€11bn.
The German company promised not to cut jobs in France for at least three years or dispose of meaningful parts of the businesses acquired from Alstom. Siemens also proposed talks on Alstom’s sensitive nuclear power assets, including a possible carve out “if this is deemed appropriate to secure the best interests of France”.
Siemens declined to comment on the content of the letter but earlier on Sunday it issued a brief statement saying it was willing to hold talks with Alstom on “future strategic opportunities”.
Alstom said that it “continues and deepens its strategic reflection” and requested that its shares stay suspended pending a further announcement no later than Wednesday morning.
Arnaud Montebourg, industry minister, had been planning to meet Jeffrey Immelt, GE’s chief executive, in Paris on Sunday to discuss the US group’s unconfirmed $13bn approach. Alstom’s board was also expected to meet on Sunday.
Putting the brakes on any swift deal between GE and Alstom, Mr Montebourg said: “Given the strategic issues for French industry and the economy, the government will not accept any hasty decisions.”
He added that a Siemens-Alstom tie-up could create two “European champions” in transport and power engineering but said that the government now wanted “the time to make a serious examination of the two proposals”.
Mr Montebourg said that while the government would consider all projects, it would need a number of conditions relating to employment, investment and research and development remaining in France as well as the independence of the nuclear industry.
Siemens’ intervention could find favour with the French government, which was reported to have urged the German group to step forward to prevent a jewel of French industrial prowess falling into US hands.
In a separate letter to Mr Immelt, obtained by BFM TV, Mr Montebourg wrote: “We have been surprised to learn that General Electric and Alstom had engaged in advanced discussions ... without any prior interactions with French government authorities.”
This would not be the first time Mr Immelt has been snubbed after flying to Paris to try and win French government support. Four years ago his bid for Areva’s power grid equipment business was rejected in favour of a domestic deal including selling some of that business to Alstom.
Joe Kaeser, Siemens’ chief executive, first held strategic talks with his Alstom counterpart in February. But the failure of those initial discussions suggests that Siemens still has some convincing to do to win over Alstom's chief executive Mr Kron.
If Alstom’s board welcomed the proposal, Siemens was prepared to enter “immediately” into discussions, the letter said.

>>> The Complexity of War & Debt – a New Factor Entirely

The Complexity of War & Debt – a New Factor Entirely

Posted on April 25, 2014 by Martin Armstrong

Musical-Chairs

The title of the next book that needs to be written is not War & Peace, but War and Debt. The interesting complexity of continually borrowing with no intention of ever paying anyone back is a totally modern development post-WWII. This has simply never been done before and governments have no clue what to do. They borrowed previously, but tended to pay back by raising taxes. At least there was some sense of obligation. Today, the national debts are just Ponzi Schemes where they issue new debt to pay off the old. This is one game of musical chairs.

Russia has raised its key interest rate to fight inflation as the rouble weakens in the face of war. These heads of states have been taught the lesson – this is no way to run a government. The key one-week minimum auction repo rate in Russia was increased by 50 basis points to 7.5 percent. There is no possible way for the Bank of Russia to lower the key rate in the coming months, especially since it raised its key rate by 150 bps in March in response to financial instability created by the political crisis in Ukraine.

Standard & Poor’s has cut Russia’s credit rating to BBB-minus, just one notch above junk – or non-investment – level. Moscow responded that politics had played a role in S&P’s decision. However, it was the first downgrade by a major agency following Russia’s annexation of Crimea from Ukraine in March.

What Russia is suddenly discovering is what we have been basing our analysis upon – Capital outflows, The investment capital has been pouring out of Russia since its economy began to weaken last year, along with emerging markets in general. However, adding this tense geopolitical situation between Russia and the West over Ukraine, has produced a mass exodus of capital in the area of $64 billion for the first quarter 2014. This is introducing additional significant capital outflows of both foreign and domestic capital from the Russian economy. We see even Russian Oligarchs moving money to other based currencies and Putin has responded by increases their taxes.

This is a interesting conflict of the old way of empire building and the post-WWII way of always borrowing and never paying anything back. Both the United States and Europe have threatened harsher sanctions against Russia and Putin has responded by sending bombers over Europe to reminded them who they are dealing with.

The capital flight from Russia of about $64 (46 billion euros), will impact its economic growth slowing it down dramatically. Meanwhile, Russia’s central bank has spent billions of US dollars on trying keeping the rouble from falling too fast.

George 1778 Tory Confiscation Note - r

We are entering a completely new era in economics. (1) if countries perceive their borrowing curtail their ambitions, then we have a check and balance, however (2) if countries cannot borrow, then they may invade and revert to the old Conquest Model relying upon the spoils of war, which included the confiscation of assets belonging to an adversary. Pictured here is a Georgia note of 1778 backed by assets confiscated from people who supported King George III. The French confiscated the assets of the Catholic Church under Napoleon.

Either Putin backs down, or he asserts the same principles and is then forced to invade in short-order just to economically survive.

(ZH) Someone Is Betting That The Chinese Currency Collapses By The End Of 20


Someone Is Betting That The Chinese Currency Collapses By The End Of 2014?

 
Last week, USDCNY began to accelerate lower and break across the "real pain" threshold that we have been discussing for many of the world's so-called "hedgers" who have been riding the one-way strengthening trend of the CNY for years and piled in with leveraged trades on what had been a one-way bet. The collapse this week, to levels not seen since pre-BoJ QQE and pre-Fed QE3 appeared to trigger an avalanche of unwinds or hedges of the exposures we have been worrying about. As the chart below shows, billions of dollars of upside calls on USDCNY were purchased on Friday with serious size out to 6.65 strikes (levels not seen since 2009) by the end of 2014.

 

The losses are mounting, as we explained in great detail here...
Simply put, if the CNY keeps going (whether by PBOC hand or a break of the virtuous cycle above), then things get ugly fast...
How Much Is at Stake?
In their previous note, MS estimated that US$350 billion of TRF have been sold since the beginning of 2013. When we dig deeper, we think it is reasonable to assume that most of what was sold in 2013 has been knocked out (at the lower knock-outs), given the price action seen in 2013.
Given that, and given what business we’ve done in 2014 calendar year to date, we think a reasonable estimate is that US$150 billion of product remains.
Taking that as a base case, we can then estimate the size of potential losses to holders of these products if USD/CNH keeps trading higher.

 

In round numbers, we estimate that for every 0.1 move in USD/CNH above the average EKI (which we have assumed here is 6.20), corporates will lose US$200 million a month. The real pain comes if USD/CNH stays above this level, as these losses will accrue every month until the contract expires. Given contracts are 24 months in tenor, this implies around US$4.8 billion in total losses for every 0.1 above the average EKI.

 

And clearly the hedging of those losses is underway en masse... (the size of the circles is the notinal being hedged - we have highlighted a few for context) as it is clear, hedgers are concerned that CNY would weaken to 6.65 or beyond by the end of the year
(h/t @moved_average )

 

The escalation of the unwind in recent days suggests the vicious circle is beginning.
Finally, putting aside speculative trader P&L losses, many of which are said to be of Japanese origin and thus will hardly enjoy much or any PBOC sympathies, here is CLSA's Russel Napier on what the long-tern fate of the Renminbi will be:
“Mercantilist alchemy transmutes China’s external surpluses into foreign exchange reserves and renminbi. But with capital outflows from China at record highs, those surpluses are only maintained due to its citizens’ foreign-currency borrowing. Bank-reserve and M2 growth are already near historical lows and are driving tighter monetary policy. This will lead to severe credit-quality issues and force the authorities to accept a credit crunch or opt for a major devaluation of the renminbi. They will do the latter; and despite five years of QE, the world will get deflation anyway.”

WSJ : Energy Firms Warn on EU Derivatives Regulations

Energy Firms Warn on EU Derivatives Regulations
Collateral Requirements Will Be Too Expensive, Say Electricity and Gas Producers

BRUSSELS—Major European energy producers have warned the European Union's executive body that new rules designed to shine a light on opaque derivative markets will backfire by increasing their business risks.

A letter sent last week to the European Commission by three organizations representing Europe's biggest electricity and gas producers argues that tougher requirements on the type of collateral that must be posted to trade energy derivatives will be prohibitively expensive for nonfinancial firms. Such firms typically use futures and options to hedge their exposure to fluctuations in energy prices.

"The change will increase the cost of trading for energy businesses, and reduce the incentives for companies to hedge their positions, which creates increased commercial risk," said Jerome Lepage, an official at the European Federation of Energy Traders, one of the organizations behind last week's letter.

The organizations represent major energy producers, including RWE AG RWE.XE -0.52% , GDF Suez SA, GSZ.FR -1.52% Royal Dutch Shell RDSB.LN -0.29% PLC and Exxon Mobil Corp. XOM +0.40%

The letter comes a month after some of Europe's biggest power exchanges, including Nasdaq NDAQ -0.61% OMX, warned the commission that the new rules would cost nonfinancial firms at least €110 million ($152.2 million) a year and are likely to drive trading away from supervised exchanges—precisely the opposite of what they are supposed to achieve.

"It's a pretty unfortunate situation. There's a very high risk that the electricity market in Europe will be destroyed," said Hans-Ole Jochumsen, a senior executive at Nasdaq OMX.

At issue is the type of asset that nonfinancial companies can post as collateral when they trade power derivatives. Under the current law, power companies can use bank guarantees as collateral, but from 2016, those guarantees will have to be fully backed by liquid assets.

The collateral rules are part of a new European law—known as the European Market Infrastructure Regulation—that aims to reduce the risk posed by giant over-the-counter derivative markets, where financial instruments are traded away from organized exchanges.

Following the collapse of Lehman Brothers and the bailout of American International Group Inc. AIG -1.68% , regulators on both sides of the Atlantic have sought to encourage traders of these lightly regulated contracts to hold more collateral and post it with central counterparties, rather than bilaterally, to reduce the risk that the failure of a large institution could bring down the entire financial system.

However, power producers and users argue that they don't have the same levels of liquid assets as financial firms because their capital is invested in physical assets, such as production plants. They say their investment policies are in most cases limited by their articles of incorporation.

"We perceive energy businesses as collateral damage from regulations aimed to reduce credit and operational risks of financial institutions," Mr. Lepage said.

Changing the collateral rules wouldn't necessarily mean revisiting the EMIR legislation, a process that could take months or years, Mr. Lepage said. The details of the law, which was passed last year, are being finalized by the European Securities and Markets Authority, the EU's Paris-based financial-markets supervisor.

The trade bodies behind the letter are the European Federation of Energy Traders, which represents power companies and energy traders; Eurelectric, representing national associations of power generators and suppliers; and Eurogas, which represents the gas industry.

A spokeswoman for the European Commission declined to comment on the letter. Spokeswomen for Eurelectric and Eurogas declined to comment.

WSJ : Premier Oil Rebuffs Two Recent Takeover Offers from Ophir Energy

Premier Oil Rebuffs Two Recent Takeover Offers from Ophir Energy
Would Have Created Company Worth £3 Billion

LONDON—U.K.-listed oil and gas explorer Premier Oil PMO.LN +4.21% PLC has rebuffed two recent takeover offers from its peer Ophir Energy OPHR.LN +3.97% PLC, according to people familiar with the matter, stymieing a deal that would have created a company worth £3 billion with assets in East Africa, the North Sea, Vietnam and the Falkland Islands.

Premier's most recent all-share offer for Ophir was rejected around two weeks ago, one of the people said. The first offer from Ophir came days after Premier's Chief Executive Simon Lockett said in February that he would be stepping down after nine years at the helm of the company, the people said.

A successful tie-up would have created the fifth-largest London-listed oil and gas company after BP BP.LN +0.85% PLC, Royal Dutch Shell RDSA.LN -0.27% PLC, BG Group BG.LN -0.43% PLC and Tullow Oil TLW.LN -2.50% PLC. But given that the second offer was "robust," it was unlikely there would be another bid, said one of the people familiar with the matter.

Africa-focused wildcatter Ophir Energy, headed by former Goldman Sachs banker Nick Cooper, has been seeking to acquire a company with oil production to increase its cash flow.

A merger with Premier, which produced 582,000 barrels of oil equivalent a day last year, would have been attractive for Ophir, giving it funds to spend on drilling costly deep water exploration wells and opening up new areas.

Ophir has had major exploration successes, notably a big gas find in 2012 off the coast of Tanzania—one of the oil industry's hottest new areas.

A deal could in turn have helped to shore up Premier, whose shares have fallen around 11% in the past year.

Investors once viewed Premier as a solid company with dependable production growth, but have become disappointed with the company following its 2012 entry into the technically challenging Sea Lion project in the Falkland Islands. That project will cost an estimated $5.2 billion to develop, funds some shareholders would prefer to have seen returned to them.