The Sweeter Offer

M&A / Energy

Serica tops Ratio's bid to win recommended offer for Pharos Energy

Serica Energy PLC has agreed a recommended cash acquisition of Pharos Energy PLC worth approximately £145.7m, gazumping a rival all-cash offer from Ratio Petroleum Energy that had been heading to a shareholder vote on 17 August. Announced on Sunday 27 July, Serica's offer of 32.6683p per share is 20.7% higher than Ratio's equivalent value, and a 28.6% premium to Pharos' undisturbed price before Ratio's bid emerged, according to the deal announcement via Slaughter and May.

Pharos' board has unanimously withdrawn its recommendation of the Ratio offer and now backs Serica, whose CEO Chris Cox called the deal "accretive across all key metrics, with multiple embedded growth options." Serica has already secured an irrevocable undertaking from Aberforth Partners covering 14.26% of Pharos shares, and $750m in acquisition funding is already in place, per Energy Voice. The deal extends Serica's footprint into Vietnam and Egypt and is expected to complete in H1 2027.

The Law Angle

The transaction is structured as a court-sanctioned scheme of arrangement under Part 26 of the Companies Act 2006 — the mechanism of choice in UK M&A for its certainty and its ability to bind all shareholders once court and shareholder approval is obtained, unlike a contractual offer which can be left with a rump of dissenters.

The real interest is Takeover Panel conduct. Pharos' board switching its recommendation from an existing recommended offer to a new bidder is governed by the Code's rules on competing offers and directors' duties, not Rule 21 (which restricts frustrating action by a target once an approach is known, not a board's freedom to recommend a genuinely superior proposal). Completion needs upstream petroleum regulatory clearances in Vietnam and Egypt; no CMA referral is expected, since international upstream oil and gas assets typically fall outside UK merger control thresholds under the Enterprise Act 2002.

Disputes / Contract

Ocado quietly drops its £190m earn-out claim against M&S

Ocado Group PLC has abandoned its long-running pursuit of a £190.7m contingent payment from Marks & Spencer Group PLC, first reported by The Times and confirmed on Tuesday 28 July, according to City A.M.. The two parties have settled with no final payment changing hands — "a dead duck," as one person close to the matter put it.

The sum stemmed from the 2019 creation of the Ocado Retail joint venture, when M&S paid £562m upfront for its 50% stake alongside a further contingent payment tied to performance targets for the year to November 2023. Those targets were missed, and both companies had already marked the receivable down in their accounts. Despite that, Ocado CEO Tim Steiner told shareholders in 2024 he was "very confident we are owed a substantial sum of money" and threatened to pursue "all available means." The retreat comes as Ocado Retail turns profitable even as the wider Ocado Group posted a £33m H1 loss, and as a fresh dispute opens over M&S's reluctance to commit to new warehouse capacity.

The Law Angle

The £190.7m was contingent consideration — an earn-out, a mechanism widely used in M&A and joint ventures to bridge valuation gaps by linking part of the price to future performance. Its enforceability turns entirely on the drafting: whether targets were objectively measurable, and whether either side owed obligations (often framed as "best endeavours" or "reasonable endeavours") to pursue them. Ocado's 2024 suggestion that pandemic disruption should be factored in points to an unresolved argument about force majeure or an implied duty of good faith in performing the joint venture agreement.

That the dispute closed quietly, with no litigation ever issued, suggests either a negotiated settlement under the JV's dispute-resolution clause or a weakening legal assessment on Ocado's side once the numbers were tested. The write-down will now need to be reflected as a final impairment in Ocado's accounts for the period of settlement.

Capital Markets / Financial Services

Reckitt beats Q2 growth forecast but flags margin squeeze ahead

Reckitt Benckiser Group PLC published half-year results on Wednesday 29 July, reporting like-for-like net revenue growth of 4.7% in the second quarter — ahead of the 3.74% analyst consensus, according to Smartkarma. Full H1 net profit and revenue fell year-on-year, and adjusted operating margin is expected to land around 200 basis points below last year's 24.6%.

Management attributes the squeeze to stranded costs following December's divestment of Essential Home, weak seasonal over-the-counter sales, and elevated oil-linked commodity costs — with a further £130m to £150m headwind flagged if oil averages $110 a barrel for the rest of the year, per the Reckitt aide memoire. The group has nonetheless maintained full-year guidance of 4% to 5% like-for-like growth, betting on H2 cost recovery and new launches such as Mucinex 12-hour Cold and Fever, having also completed a £1bn share buyback in June.

The Law Angle

As an LSE-listed company, Reckitt's half-year reporting sits under the FCA's Disclosure Guidance and Transparency Rules, which set the timetable and content requirements for interim reports. Maintaining guidance while flagging known margin headwinds is a careful act of continuous disclosure under the UK Market Abuse Regulation: once management has reasonably precise information likely to affect the share price — such as the scale of stranded costs or commodity exposure — it must be disclosed promptly, but forward-looking guidance itself is not a guarantee, and missing it later is not automatically a MAR breach absent concealment of known facts.

The completed £1bn buyback was conducted under shareholder authority granted per the Companies Act 2006, sections 701 to 723, which govern a company's power to purchase its own shares. Reckitt's retained 30% stake in the Essential Home vehicle will be equity-accounted under IAS 28, reflecting influence without control.

The Sweeter Offer

Serica tops Ratio's bid to win recommended offer for Pharos Energy

Ocado quietly drops its £190m earn-out claim against M&S

Reckitt beats Q2 growth forecast but flags margin squeeze ahead

The Final Approach

Reading the Tape

The Committee Holds, The Index Doesn't