DNO inches closer to Faroe takeover

Faroe is led by chief executive Graham Stewart. Picture: contributed.
Faroe is led by chief executive Graham Stewart. Picture: contributed.
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Norwegian energy firm DNO has moved one step closer to taking over Aberdeen-based Faroe Petroleum after gaining a majority stake in the group.

The group said today that it owns or has acceptances for 52.4 per cent of the North Sea oil producer’s shares after upping its bid for the firm to £641.7 million a day earlier.

DNO increased its offer from £608m, or 152p per share, which has been continuously rejected by Faroe’s board.

The new figure represents a price of 160p per Faroe share.

DNO’s offer will become unconditional on 11 January.

The takeover saga has seen Faroe describe DNO’s advances as “opportunistic”, arguing that it substantially undervalues the company.

Last week Faroe, which is led by chief executive Graham Stewart, hired industry experts at Gaffney, Cline & Associates to come up with their own valuation of the company, which concluded that its assets are valued in the range of 186p to 225p per share, or between $879m (£688m) and $1.1 billion.

But Faroe’s board said today that it now recommends shareholders accept the offer, although it reiterated that it does not believe it represents “fair value”.

“The board considers that, following its initial investment in Faroe and in the conduct of its subsequent offer, DNO has created considerable uncertainty for minority shareholders,” the firm added

“The board also notes that DNO has indicated that it expects to make changes to the Faroe board and the board therefore considers there to be no assurance that Faroe would continue to maintain its current corporate governance culture in line with UK corporate governance best practice.”

Faroe’s directors will now work with DNO to ensure an orderly transition of control.

Under the terms of its offer, DNO said £53m of the proceeds will be payable to Faroe directors, management and employees, while the remainder will go to shareholders other than itself.

The group said its final offer price represents a 27.2 per cent premium to Faroe’s share price of 125.8p on 23 November, the day before the pursuit was made public.