Following an announcement today, Norwegian oil and gas firm DNO has finally won its hostile takeover of purchased an additional 20.36% of Faroe’s issued share capital today, bringing its total stake to approximately 72.8% of the company.. It
DNO issued a final cash offer for all Faroe shares yesterday at 160p per share, implying a valuation of more than £641m. Consequently, the cash offer is expected to become unconditional on Jan 11, after the majority of Faroe’s shareholders and the Faroe board disclosed they will accept the offer.
The decision to recommend to shareholders to accept the offer came after it was highlighted that DNO “intends to take steps to delist the Company which would significantly reduce the liquidity and marketability of Faroe's shares.”. Faroe’s board told shareholders that it was now in their interest to accept the offer and ensure an orderly transition of control of the Company.
This marks the end of a takeover drama which had been described as opportunistic, facing resistance from several stakeholders and market commentators. DNO’s previous offer of 152p per share, prompted the board of Faroe to urge shareholders to take no action, asserting it was at a substantial discount.
The company highlighted that the offer represented only a 1% premium to the three-month volume weighted average share price, and a discount of 45% to the average price paid recently for comparable North Sea portfolios.
Furthermore, Faroe told shareholders that DNO had launched a series of “attacks” on its exploration track record and implied criticism of the technical team which Faroe stated “boasts one of the best exploration track records on the Norwegian Continental Shelf”.
Faroe’s views were shared after an independent valuation report made by a leading oil and gas industry expert, Gaffney, Cline & Associates, stated that the value of Faroe’s oil and gas assets is in the price range of $879m – $1,076m after reflecting current market oil pricing.
The valuation of Faroe's oil and gas assets implied a value per share for Faroe in the range of 186p to 225p per share (a 22%-48% premium to DNO’s offer), which suggested a substantially undervalued offer.
Cavendish Asset Management also stated that it “considered the offer by DNO unacceptable”, and sold their stake in the company.
DNO has told existing shareholders to follow the assets to DNO, and “join our more than 16,000 shareholders, 96 percent of whom are proudly Norwegian, will be welcome.”
It said that it firmly believes that Faroe's assets “will be well placed in the bosom of DNO, Norway’s oldest independent oil and gas company”.
DNO, listed on the Oslo Stock Exchange, holds assets in onshore and offshore licences at various stages of exploration, development and production in Norway, as well as the UK, Iraq and Yemen.
Bijan Mossavar-Rahmani, Executive Chairman of DNO ASA, said: “Faroe had a good run. The baton now passes to DNO."
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