State-run Korea National Oil Corp (KNOC) made a hostile cash bid worth $2.9 billion for Britain's Dana Petroleum today, highlighting a strengthening in South Korea's resolve to secure energy assets overseas.
Seoul gave KNOC a $6.5 billion warchest this year to compete with energy-hungry Asian state firms aiming to secure future supplies for their growing economies. Chinese and other firms have so far outgunned KNOC in bigger M&A battles.
The biggest hostile bid by a South Korean firm comes after Dana's management earlier this month rejected KNOC's 1,800 pence per share proposal.
The London-based explorer urged investors to take no action but investors doubted another bidder was in the wings after two months of on-off bid talks yielded no other interested party.
KNOC said it had already secured non-binding letters of intent from investors representing 48.6 percent of Dana shares, suggesting there would be no challenge.
"I'm not holding my breath," one hedge fund manager said.
The 1,800 pence/share offer represents a premium of 59 per cent to the closing price of Dana shares on June 30th, the day before news of the KNOC approach emerged.
"The offer implies an enterprise value per proven and possible reserves of circa $12.5/barrel of oil equivalent, which is a good price for the Dana assets, in our view," said Marc Kofler, oil analyst at Citigroup in a research note.
Dana shares, which have lagged the offer price by around a pound since KNOC first revealed it last month because of fears a deal would not materialise, traded up 5.6 percent at 1,790 pence at 1122 GMT.
Some investors believe Dana's reluctance to accept what many analysts see as a generous bid is partly related to Chief Executive Tom Cross's close ties to the company.
KNOC said it had no alternative but to take its offer to shareholders.
"We are very disappointed that the board of Dana does not agree that 1,800 pence per share represents a full and fair value for the company," KNOC senior executive vice president Kim Seong-hoo said in a statement.
KNOC has offered to pay £1.67 bln in cash for Dana and would buy out convertible bond holders, giving a total deal value of $2.9 bln.
The deal would top the purchase by KNOC, which explores and stores oil, of Canada's Harvest Energy in October for $1.7 billion.
Analysts saw a bid as positive for South Korea and KNOC.
"This shows the will of the South Korean government, which has been trying hard to boost its presence in global resource markets, and we consider it positively," Sean Hwang, head of the research team at Mirae Asset Securities, said before KNOC's confirmation of the bid.
Dana said last week it had ended takeover talks with KNOC after the Korean firm declined to sign an agreement that Dana sought before opening its books to KNOC.
The North Sea and Egypt-focused explorer had said it would only let KNOC conduct due diligence if KNOC signed a non-disclosure agreement that investors said might preclude KNOC from later making a hostile bid.
Dana's top institutional investors, including Schroders, BlackRock and JPMorgan Asset Management, had urged Dana to engage in talks, according to media reports.
Reuters