Korea National Oil Makes $2.9 Billion Bid for Dana
By Shinhye Kang and Kari Lundgren
Aug. 20 (Bloomberg) -- Korea National Oil Corp. made a hostile 1.87 billion-pound ($2.9 billion) bid for U.K. explorer Dana Petroleum Plc after its takeover offer was rejected.
The state-owned energy explorer offered 1,800 pence a share and to buy Dana’s convertible bonds, Korea National said in a statement today. The company received letters of support from shareholders representing about 49 percent of Dana stock, according to the statement.
Korea National plans to spend about $6 billion on acquisitions and projects this year to more than double output by 2012 as Asia’s fourth-biggest oil importer competes with China and India for resources. Dana, which focuses on the North Sea and Africa, said in March its probable reserves rose 15 percent to 223 million barrels of oil equivalent in 2009.
“It’s a really full price and it’s cash as well,” Peter Hitchens, an analyst at Panmure Gordon & Co. in London, said in a telephone interview. “A lot of shareholders are sitting there thinking that if the bid doesn’t go through it’s going to be years before the shares reach these levels again.”
Korea National’s offer is a 59 percent premium over Dana’s closing price on June 30, the day before the Aberdeen, Scotland- based company said it had received a takeover approach. The stock jumped as much as 5.9 percent to 1,795 pence, the highest in two years, and traded at 1,794 pence as of 10:44 a.m. local time.
Shareholder Backing
Shareholders that have accepted the KNOC offer include Schroder Investment Management Ltd., which has about 15 percent of the stock, as well as BlackRock Investment Management Ltd. and JPMorgan Asset Management, according to the statement.
The support from shareholders suggests “this is likely to be a done deal,” Nick Copeman, an analyst at Oriel Securities, said in a note.
In a statement, Dana urged shareholders and convertible bond holders to take no action in respect of the offer, and said it would give an update on its current business outlook when it releases results on Aug. 27.
Dana slumped as much as 13 percent on Aug. 12 when it rejected Korea National’s offer and pared losses after the South Korean company responded that it was considering its options.
“We believe that our offer of 1,800 pence per share fully and fairly reflects all of Dana’s recently announced and ongoing developments, together with its exploration potential,” Seong-Hoon Kim, senior executive vice president at Korea National, said in the satatement.
The yield on Korea National’s $1 billion in 5.375 percent bonds due in 2014 rose to 3.009 percent from 2.993 percent yesterday, according to Royal Bank of Scotland Group Plc prices.
Higher Offer
Korea National had increased its indicative proposal from 1,700 pence on July 23. The deal would be South Korea’s biggest overseas acquisition for 2010, according to Bloomberg data. Bank of America Corp.’s Merrill Lynch & Co. unit is the financial advisor to Korea National.
Asia’s fourth-biggest economy, which imports almost all its oil needs, plans $12 billion in overseas energy projects and acquisitions this year, up from $6.7 billion last year, the Ministry of Knowledge Economy said in January.
Dana executives flew to Canada to meet with KNOC officials on Aug. 6 to advance talks and make a non-disclosure agreement to access company data, the company said in a Aug. 12 statement.
Korea National on Aug. 9 declined to sign a non-disclosure agreement and conduct diligence without the board’s backing, according to a statement on Aug. 12. Therefore, Dana’s board “does not consider it is prudent or warranted to provide a recommendation,” the company said at the time.
Exploration Licenses
The deal values Dana at about $12 a barrel of oil equivalent, and anything between $10 and $13 a barrel is suitable for an explorer, according to Cho Seung Yeon, an analyst at HMC Investment Securities Co.
With more than 100 interests in exploration and production licenses in nine countries, Dana pumps oil and gas from 37 fields. In June, the company agreed to buy Suncor Energy Inc.’s Dutch North Sea assets for 328 million euros in cash, its biggest purchase to date. Dana drilled 17 exploration wells last year and produced an average of about 38,700 barrels of oil equivalent a day.
“Dana gives KNOC critical mass in the North Sea,” Panmure Gordon’s Hitchens said, “it’s a vehicle they can use to start buying assets that are up for sale from the majors.”
Harvest Energy Purchase
Korea National in October agreed to buy Canada’s Harvest Energy Trust for $3.9 billion in the nation’s biggest overseas energy acquisition after purchasing a stake in Petro-Tech Peruana SA of Peru for $450 million in February last year.
This year is on course to be the busiest for natural resources deals, with commodities companies including miners, oil producers and chemical makers having announced $362 billion of takeovers so far this year. If they maintain that pace, they will eclipse the record $576 billion of deals announced in 2007, according to data compiled by Bloomberg.
BHP Billiton Ltd., which announced a $40 billion hostile bid for Potash Corp. of Saskatchewan Inc. this week, Vedanta Resources Plc and Apache Corp. are taking advantage of low interest rates to finance all-cash deals that allow them to add reserves more cheaply than through exploration. In addition, valuations haven’t rebounded as fast as commodity prices.
To contact the reporters on this story: Shinhye Kang in Seoul at skang24@bloomberg.net; Cathy Chan in Hong Kong at kchan14@bloomberg.net.
Last Updated: August 20, 2010 05:48 EDT
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