Cross on way out as KNOC bids for Dana Petroleum

Published on Wednesday 1 September 2010 17:51

TOM Cross, the chief executive of embattled oil firm Dana Petroleum, is set to lose his job whether he succeeds or not in the takeover battle he is fighting with the Korea National Oil Company.

The City has criticised Cross (pictured) for "prevaricating" in an effort to get his suitor to raise its bid beyond 18 per share. Analysts believe the Dana board would back a deal at 18.25 a share.

Most think it unlikely KNOC will be willing to raise the price of its hostile bid this week when Dana reveals its formal defence based around valuation due on Wednesday. It disappointed the markets last month when it unveiled interims but delayed its response to the bid.

Most expect its "rabbit in the hat" to be a 240 million acquisition of UK North Sea oil fields from Canada's Suncor, having hinted it had "further M&A growth opportunities identified". But sources close to KNOC insist an acquisition would be immaterial to the "full and final" bid which values Dana at 1.87 billion.

KNOC claims more than 50 per cent of shareholders have signed a letter of intent supporting the offer price.

But a call by the Korean firm for investors to accept the offer did not materialise in a sign that many seem to be waiting to see what Dana has to say.

"If they didn't believe there was potential for further information they would have been prepared to sign irrevocables," said a source close to Dana. "Shareholders expressed their wish to see new information."

Derek Mitchell, fund manager with Royal London Asset Management, said there was "not a jot" of a chance Dana will succeed in persuading shareholders to hold out for a higher bid.

He said: "The 18 is a pretty full valuation. It will have to be pretty substantial for the bid not to succeed."

He added: "You start to worry about the management at the end of it. Does Cross keep his job?"

Critics have pointed out the millions Dana is incurring in adviser fees. The firm has appointed three banks - RBS Hoare Govett, RBC Capital Markets and, ten days ago, Morgan Stanley. The firm also added City PR firm Brunswick in addition to College Hill.

Sources close to KNOC said the firm was "disappointed" that Dana has drawn the process out so long.

By holding back announcing details of a deal with Suncor, it has prevented KNOC from buying shares from investors willing to sell at the 18 price on the basis the Korean firm is aware of the plan and is considered an "insider".

A KNOC source said: "They are clearly playing cute games with the legal points. They are preventing KNOC from buying shares by not cleansing them about being insiders. They are playing for time. It is hard to know what has changed in terms of what rabbit can be pulled out of the hat."