Dana Petroleum urged to talk after bid raised

Published on Saturday 31 July 2010 10:52

THE board of North Sea oil explorer Dana Petroleum will come under intense pressure this week to open talks on a £1.7 billion takeover bid from a state-owned South Korean company.

So far they have resisted the 1,800p per share approach from the Korea National Oil Corporation (KNOC) despite reassurances on proof of funding, which was one of Dana's key objections.

It is understood that KNOC has told Dana that this is a final "take it or leave it" offer and that it is prepared to walk away.

Documents have been filed by KNOC in a move likely to encourage Dana shareholders to push for a meeting between the two.

It has raised funds from a consortium of Asian banks ready to back the deal.

Dana chief executive Tom Cross will enjoy a 30 million pay day for his 2 per cent stake if the deal goes through.

But he and his board have refused to meet KNOC's representatives since the first notification of a 1,700p per share cash offer on 2 July.

On Friday Dana announced it had discovered an oilfield in Egypt, which analysts said would add 5p a share to Dana's market value. The statement was interpreted as a sign of defiance towards its suitor.

But Cross and his senior non-executive director Philip Dayer are thought to have been told during discussions last week with about ten of the biggest shareholders that they should open talks with KNOC whose representatives also held talks with Dana investors to test support for the proposal. It is thought that shareholders urged KNOC to press ahead with its plans.

Schroders, the biggest investor with a 13 per cent stake, is leading calls for a meeting amid concerns that Cross and his board are holding out for an unrealistic price.

Richard Buxton, head of UK equities at Schroders described the offer as a "fair price" and said the directors should engage at this level. Other major shareholders, including Black Rock and JP Morgan Asset Management, also want discussions to take place.

KNOC, headquartered in Gyeonggi-do, South Korea, is the country's national oil and gas company and one of its biggest. It has oil and gas fields in 17 countries across Asia and the Middle East, and also in Canada, Indonesia, Kazakhstan, Nigeria, Peru and Russia. The company has oil reserves of around 600 million barrels and gas reserves of 10 billion cubic metres.

KNOC wants to double its worldwide production from 130 million barrels a day. Its global ambitions were helped by last year's acquisition of Canada's Harvest Energy which helped establish international opinion towards Korea's energy expansion.

With a budget of $6.5bn for this year alone, analysts believe KNOC will not be restricted in tempting shareholders of modestly sized businesses such as Dana. In a depressed market Dana shares closed up just 1p on Friday to 1,711p indicating some nervousness about the deal going ahead.