Koreans close in on Dana takeover with dawn raid

Knoc buys 29.5 per cent of Scottish oil company at £18 a share

Korea National Oil Corporation was last night in touching distance of pulling off its £1.7bn hostile bid for Dana Petroleum, after a dawn raid that saw it snap up almost 30 per cent of the Scottish oil company's shares.

While Knoc needs 90 per cent of Dana's shareholders to sell up for the deal to be finalised, the Koran state-backed company is now understood to be extremely confident of securing the prize at the end of what has been a bitter takeover battle.

Knoc, to which the Korean government has extended considerable funding as it seeks to reduce its dependence on imports of oil and gas, first approached Dana in June. After the Scottish company rejected its £18-a-share bid, Knoc went straight to shareholders, who have until next Thursday to decide whether to accept the offer.

Knoc has repeatedly refused to raise its bid, dismissing Dana's accusation that the offer was "opportunistic and inadequate". It also poured scorn on an independent report commissioned by Tom Cross, Dana's chief executive, which suggested a fair value for the company would be between £21.20 and £24.65 a share.

Dana's claim to be in a "transformational growth period" did not stack up, Knoc argued, because production from the Scottish company's existing assets had been falling, and estimates of its reserves had been revised down.

Nevertheless, Dana has continued to urge shareholders to reject Knoc's advances, clinging to the hope that a rival bidder might emerge, or even that it might be able to secure a higher price by agreeing to recommend the bid. Though its defence was knocked by the decision of 49 per cent of investors to pledge support to Knoc, including its two largest shareholders, the fund managers BlackRock and Schroders, the company has stuck to its guns.

That resistance, however, now looks futile following Knoc's surprise move yesterday. In a statement, the Korean company revealed that its adviser, Bank of America Merrill Lynch, had contacted a number of Dana investors before the market opened yesterday and had subsequently been able to buy 29.5 per cent of the shares in the company at the offer price of £18.

Knoc stopped short of acquisitions that would have taken its stake above 30 per cent because that would have automatically triggered a full-scale offer for the company and reset the takeover timetable to which it has been working. However, while some of the shares it acquired yesterday were from shareholders that have already signalled their support, including a large block of stock from Schroders, market analysts now believe the deal is all but done.

Rumours of a rival bidder for Dana have so far come to nothing and the large stake now owned by Knoc effectively prevents another acquirer becoming involved in the deal at the eleventh hour.

Knoc's direct intervention in the market yesterday was made possible by Dana's confirmation last week that it is buying Suncor, a Canadian company with North Sea interests. Knoc, which was given access to Dana's books over the summer, knew about the acquisition; and its inside knowledge prevented it buying any stock until the purchase was announced.

The deal is just the latest takeover or merger in a wave of consolidation in the national resources sector. In many cases the trend is being driven by countries keen to secure a greater share of energy supplies. Further deals are now expected.

Knoc refused to comment last night, and a spokesman for Dana would say only that its advice to shareholders, to do nothing, had not changed.

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