Aran rejects pounds 160m bid from acquisitive Arco


Industrial Correspondent

Aran Energy, the Irish oil company, has rejected a pounds 160m hostile bid by the US energy group, Arco. The attack from the US group coincided with successful new testing on the important Schiehallion oil field west of Shetland, which is operated by BP and Amerada Hess and in which Aran has a sizeable stake.

Michael Whelan, Aran's chairman and founder, said the bid failed to reflect the company's true worth. He rejected suggestions that Aran was hoping for a white knight, adding: "We are entirely capable of funding our own developments, including Schiehallion, from our own resources."

Arco, one of the largest US oil and gas companies, said its cash offer of 61.4p represented a 41 per cent premium over Friday's closing price of 44.5p and was "both full and fair". Shares in Aran rose by 23p to 67.5p amid market speculation over a possible counter-offer from another large group such as Lasmo or Enterprise.

Aran's shares are listed in Dublin, London and on Nasdaq. The company has about 15,000 private shareholders in Ireland which account for almost a quarter of the stock. The largest private shareholder is Mr Whelan, who owns 1.2 per cent.

The bid sparked rumours of possible insider dealing as traders pointed to a purchase of 150,000 Aran shares on Friday five minutes before the close of play. The deal was three times the normal market size of 50,000 shares. The Stock Exchange refused to comment on the situation.

The consensus in the industry is that Arco is primarily interested in the Schiehallion stake, since west of Shetland is now regarded as one of the most exciting areas around the UK.

But Terry Dallas, Arco's treasurer and vice-president, said Aran's interests in the Alba and Gryphon fields, which are already producing, were also important. "West of Shetland is a high-potential but high-risk area. Alba and Gryphon are sound and good fields. It is a balanced package," he said.

Mr Dallas said Aran fitted Arco's strategy of increasing its reserves outside the US. In 1987, less than 10 per cent of group reserves were overseas, rising to 21 per cent last year, and the UK is already one of the most important areas. "We wish that trend to continue. I do not know that we have a stopping point," he said.

Arco is to meet the Department of Trade and Industry - which will have to approve any takeover - this week.

The company also said it had requested a meeting with Aran through Morgan Grenfell, but had not heard from them. Mr Whelan said he was not aware that any attempt had been made to contact him. "I am always at the end of a telephone. There was no approach either direct or indirect."

Investment Column, page 18