Monday morning DNO announced a cash offer for all shares of Faroe Petroleum.
DNO offers to pay 152 pence in cash for each Faroe share – valuing Faroe at approximately £607.9 million. The company currently holds 28,22% shares in Faroe.
The Faroe share price jumped 25,6% on the London stock exchange after the news broke monday morning.
Analyst in Sparebank 1 Markets, Teodor Sveen-Nilsen writes in a comment to TDN Direkt that he believes DNO needs to increase their offer by 10-20%.
In a response Monday afternoon, Faroe Petroleum writes that they believe the offer is opportunistic and substantially undervalues the company and encourages all shareholders to take no action.
John Bentley, Non-Executive Chairman of Faroe, commented:
“DNO’s offer substantially undervalues Faroe on every applicable metric.
The Board is determined to defend our shareholders’ rights to receive an appropriate premium for a fully funded business which is actively progressing the delivery of its highly attractive growth prospects and is the only platform available which solves DNO’s strategic challenges.
We believe that Faroe is worth substantially more than 152p per share and we urge shareholders to reject DNO’s opportunistic, unsolicited and inadequate offer.”
From the DNO press release:
Commenting on the Offer, Bijan Mossavar-Rahmani, Executive Chairman of DNO, said:
«We are pleased now to engage directly with the Faroe shareholders with a proposed all-cash voluntary offer of 152 pence per share which represents a premium of 44.8 percent to the closing price of 105 pence on the day before DNO announced its first acquisition of Faroe shares last April, and a premium of 20.8 percent to the closing price of 125.8 pence last Friday. In the period between our first acquisition, triggering significant bid speculation, and this offer, the price of Brent crude has dropped 13 percent and oil and equity markets have entered a period of great uncertainty.
For those shareholders who wish to exit, DNO is therefore offering a considerable premium.
For those who wish to remain, there is no assurance of Faroe achieving its full value potential in a volatile commodity and financial markets environment as a relatively small scale, financially constrained UK-AIM listed company whose share price performance has remained stubbornly disappointing, with the very notable exception of short-term spikes following the sale of a particular large block of shares by one investor to another (most recently to DNO) and the attendant speculation about an impending takeover premium with each such transaction.
We firmly believe that Faroe’s assets, the substantial part of which are Norwegian, are better placed in the bosom of DNO, Norway’s oldest independent oil and gas company, currently operating gross production of 125,000 barrels per day which compares with the 7,500 barrels of oil equivalent a day of gross production operated by Faroe. DNO’s proven and probable reserves were nearly four times those of Faroe’s as reported at 31 December 2017.
Whether the offer achieves DNO’s minimum acquisition target or the acquisition of all of Faroe’s shares, we attach great importance to retaining the skills, knowledge and expertise of Faroe’s operational management and employees. We intend to retain Faroe’s Aberdeen head office and each of the other offices.»