South Korea's national oil company went hostile with its £18-a-share bid for Dana Petroleum yesterday, after the FTSE 250-listed company's management refused the offer a week ago.
On the first day of a 28-day offer period, Korea National Oil Corporation (KNOC) said it had received letters of intent in support of the offer from Dana shareholders representing nearly 49 per cent of the stock.
The offer values Dana at around £1.87bn, at a 59 per cent premium to Dana's £11.51 stock price the day before KNOC's initial approach at the end of June.
Seong-Hoon Kim, a senior executive at KNOC, yesterday said the Korean group was "very disappointed" that an offer "fully and fairly" reflecting Dana's potential was not going ahead with the recommendation of the target's board. "We have no alternative other than to put our attractive proposal directly to shareholders, given the inability to reach a private agreement with the board of Dana," Dr Kim added.
Dana's management, led by the chief executive Tom Cross, has repeatedly found itself at odds with KNOC since the offer was first made. Late last month, KNOC went public with its offer, accusing Dana's board of failing to make a "satisfactory response" – to which Dana countered that KNOC repeatedly failed to answer questions about its financing of the deal. When the deal was formally rejected last week, Dana not only baulked at what it considered an inadequate price but also cited KNOC's refusal to sign a non-disclosure agreement needed to conduct due diligence, which it said left "no way of progressing the talks".
Yesterday, the UK company did not repeat its dissatisfaction with the price. But it did make allusions to "well-advanced, non-public information" regarding its business development activities that could materially increase Dana's oil production and reserves. The board is recommending that shareholders do not act on KNOC's offer until Dana's interim results are published next Friday.
"In addition to a review of the period ended 30 June 2010, the company will give a full operational update on its current production, development and exploration activities and the near-term business development programme," Dana said in a statement.
Of the deal's supporters among Dana's shareholders, institutional investors including Schroders, Blackrock and JP Morgan Asset Management represent 21.2 per cent and hedge funds with long positions held through contracts for difference another 27.4 per cent.
Dana's activities focus on the North Sea and Egypt. The company's shares closed up 6 per cent, or 103p, at 1,798p.
KNOC's interest in Dana springs from domestic political pressure to increase production from 137,000 barrels per day to 300,000 barrels a day by 2012 to help allay South Korea's concerns about security of supply.
Dana is the latest in a string of attempts by KNOC to buy up smaller explorers. Most recently, the group was beaten to the UK-listed Addax Petroleum by China's Sinopec last year. In 2007, it missed out on Burren Energy, which went to Italy's ENI.Reuse content