Korea National Oil Corporation must want North Sea oil badly. Why else go hostile in its £18-a-share approach for Dana Petroleum, which values the UK-listed exploration and production group at almost £1.9bn? This aggressive move from the Asian state entity, which has seen similar deals slip away before because it was too timid in its approaches, has raised the stakes all around.
On one side, Dana’s chief executive and founder Tom Cross is reluctant to let go at the going price. On the other, KNOC is so close to getting Dana that it can almost touch it. There is public backing for its offer from Dana’s three main institutional shareholders – Schroders, JP Morgan and BlackRock – and holders of almost half the shares intend to tender. But KNOC would like to get the 90 per cent required to force a squeeze-out of minorities.
Some investors believe there is still upside. The shares moved above £18 – just – on Monday. The trouble is that the Koreans have already increased their offer once. A still higher offer is unlikely without something spectacular along with Dana’s interim results on Friday.
A possible announcement to buy Suncor’s North Sea business for up to £240m will not be enough. It would add 16,000 barrels of oil a day of production, but may be priced in to KNOC’s offer. Anne Marie, Dana’s high-risk, high-impact well off the Faroe Islands, could also do the trick if it gushes even more than the hype surrounding it.
KNOC’s main vulnerability may be political. The South Korean company wants to double its production to 300,000 barrels a day. Buying Dana is central to achieving that objective – and international oil assets are not getting any cheaper. This deal will probably get done, but KNOC is learning that a recommended deal comes at a premium.
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