North Sea oil producer Faroe Petroleum has urged its shareholders to reject an offer from rival DNO, dismissing it as “opportunistic, unsolicited and inadequate”.
Norwegian oil group DNO, which is pursuing a hostile takeover attempt, has offered Faroe shareholders 152p a share, valuing the company at £610m on a fully diluted basis.
On Thursday, Faroe’s board rejected the offer as expected, reiterating previous arguments that it undervalues the business.
“It is your board’s strong belief that this offer is entirely opportunistic and that the terms fundamentally undervalue Faroe,” said John Bentley, non executive chairman of Faroe. “We have one of the best exploration track records on the Norwegian continental shelf and are currently in the midst of the largest drilling campaign in Faroe’s history.”
Faroe said an independent report had validated its management’s track record in exploration and that a recent asset swap with Equinor would deliver an additional £96m cash flow over the next two years.
DNO said it believed Faroe’s defence document contained “no substantial new information”. It increased its stake in the company to 29.9 per cent on Thursday.
“We resolutely continue to believe that the true value of Faroe is richly reflected in our offer of 152 pence per share,” said Bijan Mossavar-Rahmani, executive chairman of DNO. “Moreover, we have outlined clearly to Faroe shareholders where we believe Faroe’s value would lie without DNO’s embrace in these very volatile and uncertain times. Shareholders will now make their decision.”
DNO has given shareholders until January 2 to accept its offer at which point it can decide to withdraw it. Shareholders will otherwise have until February 10 to accept.
Shares in Faroe closed down around half a per cent on Thursday at 151.2p.