A bid battle for Heritage Oil could break out after the independent upstream exploration and production company said its proposed merger with Turkey's Genel Energy was off and it would instead sell its interests in Uganda to Italian major ENI for £900 million.

Heritage, run and substantially owned by the former African mercenary Tony Buckingham, is one of the star performers of the London oil and gas sector and was reckoned to be headed for the FTSE 100 on the back of its planned Genel deal and the extent of its finds in the Lake Albert Rift Basin.

ENI, a serial predator of the London stockmarket — it has in recent years bought Lasmo, British Borneo, Burren Energy and First Calgary — has been prowling around Uganda in which another stellar London performer, Tullow Oil, has significant interests.

However, ENI's perusal of Uganda has resulted in a deal with Buckingham and not, as speculated, Tullow.

The deal also spells the end of the Genel-Heritage merger.

Genel has interests in Heritage's other significant play, the Kurdistan region of northern Iraq.

The cash sees Heritage pledging to give as much as £250 million or 100p a share to its investors in a special dividend — more than £80 million of which goes to Buckingham.

But analyst Jessica Saadat from broker Cazenove said that the ENI deal could yet be gatecrashed.

She believes others could yet put a higher value on Heritage's interests in Ugandan which “could trigger an unsolicited approach for the whole company”.

Heritage shares were on the rise again today, up 22½p to 529½p.