Shares in Aberdeen-based Faroe Petroleum have soared more than 25 per cent after its largest shareholder launched a £608 million takeover bid for the company.
DNO, a Norwegian firm which already owns more than 28 per cent of Faroe, said it was offering a “considerable premium” for investors wishing to exit amid the uncertainty of the oil market.
Faroe, which is headed by chief executive Graham Stewart, responded to the unsolicited offer with a statement urging investors to take no action in relation to their shares.
Some analysts have said the proposal undervalues the company, and urged investors to turn down the “low-ball” offer.
The bid confirmed growing speculation that DNO would make an offer, after the company bought its sizeable stake in Faroe earlier this year.
DNO’s executive chairman, Bijan Mossavar-Rahmani, said in the event of an acquisition, the firm would retain the “skills, knowledge and expertise” of Faroe’s employees.
“We intend to retain Faroe’s Aberdeen head office and each of the other offices,” he said.
Faroe has operations in the UK, Ireland and Norway. Mossavar-Rahmani said that its assets would be “better placed in the bosom” of DNO, which is Norway’s oldest independent oil and gas company.
The offer comes on the back of weaker oil prices in recent weeks. The price of Brent crude has tumbled since hitting a four-year high in September, with a barrel trading at $60 on Monday morning.
Analysts at BMO said the offer of 152p per share was below their valuation of 170p per share.
“DNO’s bid looks opportunistic, coming on the back of recent weakness in commodity markets,” they said.
“Faroe’s strong balance sheet and growth trajectory means it is relatively well insulated against short-term oil price moves.”
This was echoed by Cantor Fitzgerald, who said: “While DNO’s significant existing stake may make a takeover now appear ultimately inevitable, in our view investors would be ill-advised to accept what is clearly a “low-ball” offer.”