ALLIANCE Resources has dropped litigation against former chief executive, Cork businessman, Mr John O'Brien. However, the company said it retracted none of the allegations against him. The company has also announced a merger with US resources company, LaTex.

The details of the settlement have not been disclosed but claims by the company against Mr O'Brien and the counterclaims by him against Alliance have been withdrawn.

Alliance, however, said it retracts none of the statements" of claims made concerning Mr O'Brien's conduct which it has made". The statement added that Mr O'Brien "admits to no wrongdoing".

Alliance had said that it was going to "vigorously pursue" him for unspecified damages. It had also intended to pursue legal action against a number of offshore companies in which the former chief executive had "declared interests which were previously undisclosed".

Alliance, a publicly quoted British company, had alleged that Mr O'Brien had made "secret profits" at the company's expense.

In December the London High Court refused to discharge a Mareva injunction freezing Mr O'Brien's financial assets.

Part of the settlement is understood to involve an application to the London High Court to remove that injunction.

Mr O'Brien was removed as, chief executive last September. He had always denied the allegations and was going to contest them.

Yesterday, he stressed that the deal with Alliance indicated that the allegations were "totally false otherwise Alliance would have pursued them".

He said all members of the original board were aware of what he had done, noting that the composition of that board had subsequently changed.

The British Serious Fraud Office (SFO) has been investigating some of Mr O'Brien's transactions with Alliance for alleged irregularities. Yesterday, he said he had a phone call from the SFO and had been "either abroad or away and they haven't come back".

The deal with Mr O'Brien is understood to have been made to make way for the merger with LaTex. That deal is, in effect, a reverse takeover of Alliance.

The merger, which has to be approved by Alliance and LaTex shareholders, will be satisfied by the issue of Alliance shares to LaTex which will end up with a 72 per cent stake of the enlarged group. Alliance shareholders will have the other 28 per cent.

LaTex shareholders will receive 40 Alliance shares for each one held. Alliance shares have been suspended pending further details of the reorganisation.

LaTex, an independent oil and gas company located in Tulsa, Oklahoma, has its shares listed on the NASDAQ in New York. It mainly engaged in the acquisition of producing oil and gas properties, which are said to have the potential for increased value through exploitation and development.

LaTex owns and operates producing oil and gas properties in 14 states, with proven reserves ink Mississippi, Louisiana, Oklahoma, Texas and Alabama. Daily production averages 1,200 barrels, of oil and 10 million cubic feet of" gas. Reserves are estimated at 6.3 million barrels of oil and 19.5 billion cubic feet of gas.

LaTex generated net income of $531,000 on revenue of $12.9 million (£8 million) in the nine months to April 30th, 1996. Net assets were $16.3 million Alliance reported an operating profit after tax of $2.388 million in the six months to last October.

Alliance said the merger would provide "necessary critical mass" which would enhance prospects and realise its stated objectives of building an international portfolio of development prospects.