Third shareholder pushes bidder to lift its Dragon Oil offer
Published 18/07/2015 | 02:30
Takeover plans for Dragon Oil risk coming unstuck as a third shareholder has come out against the €6.3bn offer.
Elliott Advisors (UK), which owns 3.3pc of Dragon Oil, became the latest shareholder to say Emirates National Oil Co's (ENOC) offer to buy Dragon Oil undervalues the oil producer.
Baillie Gifford, which holds about 7.1pc in Dragon Oil, and Setanta Asset Management, which owns about 3.1pc, have also said ENOC's offer undervalued the company.
Scotland-based Baillie Gifford has called on other minority shareholders to come together to push for a better offer, that could potentially include a share of future Dragon Oil income if production rose significantly after a sale of the business.
ENOC owns a majority stake in Dragon Oil, but if 23pc of shareholders or more reject its offer price its bid will fail.
Dragon could increase oil production "meaningfully in excess" of the company's target of 100,000 barrels of oil per day, Elliott Advisors said yesterday, justifying a higher price for the shares.
The view contrasts with majority shareholder ENOC, which said on Thursday that Dragon Oil should switch off dividends - whether it is sold or not - because of what it said are operational challenges at its Cheleken field in Turkmenistan and should lower its target to 90,000 barrels.
ENOC, which already owns 54pc of Dragon Oil, offered 750 pence per share to buy out minority shareholders of the firm in June. The proposal values Dragon Oil at about £3.7bn (€5.3bn).
Shareholders have until the end of the month to consider the offer. ENOC plans to de-list Dragon Oil if its takeover bid is successful. Dragon's board has recommended that its shareholders approve the takeover offer.
ENOC's comments regarding dividends were seen by analysts as a "thinly veiled threat" to shareholders to accept its offer.
Its majority stake in Dragon Oil would allow ENOC to vote down any proposal to pay dividends at the company's annual general meeting, even if its takeover bid fails.
Yesterday ENOC insisted its view is based on Dragon Oil's own data.
"We, like all shareholders, must base our valuation on information provided by Dragon Oil and its technical team. They know more about the assets and their potential than those citing unsubstantiated speculation.
"The technical team of Dragon Oil has clearly stated that production will plateau for the next five years. We are surprised that a few financial investors claim to know more about the assets than the people that operate them on a daily basis," a spokesman for ENOC said.
Shares in Dragon Oil closed down 0.62pc at 721 pence in London yesterday.