The Pharos Energy board has switched its support back to Ratio Petroleum after the Israeli company increased its takeover offer for the London-listed firm.

Ratio upped its latest offer for Pharos to 32.8183p a share, to move ahead of rival bidder Serica Energy, also a London-based oil and gas company that trades on the AIM market.

Israel-based Ratio launched the original takeover approach for Pharos in June, before being outbid by Serica in July. Ratio has now regained the lead with an improved £146.4m offer that has won back the support of the Pharos board.

Under the revised terms, shareholders will receive 28.8183p in cash per share plus a 4p special dividend, funded from Pharos' existing cash resources. Including the 0.9317p final dividend already paid, the total value to shareholders rises to 33.75p a share.

The offer values Pharos at approximately £146.4m, representing a 29.2% premium to the company's closing share price on 23 June, before Ratio's original approach was announced.

Pharos shares were up 7.6% to 33.9p in London trading. The shares rose slightly above the current offer value, suggesting the market believes there could still be room for a further bid.

The Pharos board, advised by Rothschild & Co, said it considered the increased Ratio offer “fair and reasonable” and unanimously recommended that shareholders vote in favour of the scheme. It has withdrawn its previous recommendation of Serica’s offer and said shareholders should take no further action in relation to the competing proposal.

Although Pharos only generates around $115m of annual revenue, it owns stakes in producing fields plus exploration acreage in Vietnam and Egypt. Both bidders appear to believe these assets can generate significantly more value than the market was attributing to them before the bidding started.

Pharos’ shareholder meetings, originally scheduled for 17 August, will be adjourned to allow shareholders more time to consider the revised terms. The long-stop date for the transaction has also been extended to 15 July 2027.

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