Norway’s oldest oil company launches hostile bid for London-listed rival Faroe Petroleum after slump in oil price hit shares across industry
Norway’s oldest oil company has launched a hostile bid for London-listed rival Faroe Petroleum after a slump in the oil price hit shares across the industry.
DNO is offering investors 152p per share in a deal valuing Faroe at almost £608m – 20.8 per cent higher than its closing price on Friday.
But after a board meeting to discuss the offer, Faroe Petroleum condemned it as opportunistic and substantially undervaluing the North Sea group, and pleaded with shareholders to ignore it.
Choppy waters: DNO is offering investors 152p per share in a deal valuing Faroe at almost £608m
Non-executive chairman John Bentley said: ‘We believe Faroe is worth substantially more than 152p per share and we urge shareholders to reject DNO’s opportunistic, unsolicited and inadequate offer.’
His comments were echoed by analysts. And yesterday Faroe’s shares closed up 26.9 per cent, or 33.8p, at 159.6p, in a sign that traders expect DNO to be forced to raise its bid.
Cantor Fitzgerald valued Faroe’s shares at 166p and said in a note: ‘The offer is an opportunistic one given the recent oil price weakness, and significantly undervalues the shares.’
Bijan Mossavar-Rahmani, executive chairman of DNO, said AIM-listed Faroe’s share price has been stubbornly disappointing and investors who stick with the firm have no guarantee it will perform any better.
DNO’s move has been widely anticipated since it bought a 28.8 per cent stake in Aberdeen-headquartered Faroe in April. If it had bought a 30 pert cent stake, it would have had to make an offer for the whole company.
Earlier this year, DNO asked for a shareholder meeting to discuss putting Mossavar-Rahmani and managing director Bjorn Dale on the Faroe board, but dropped the request in August.
DNO’s drive to take over Faroe is part of an aggressive push to re-enter the North Sea oil sector. It returned to the region in 2017 after years of expansion in the Middle East.
The price of oil has fallen from $86 a barrel in the first week of October to around $60 now.