Monday 18 June 2018

Dragon shares offer extended after ENOC fails to get majority

Offer by ENOC has been taken up by 14.5pc of share capital
Offer by ENOC has been taken up by 14.5pc of share capital

Paul O'Donoghue

Emirates National Oil Company (ENOC) has extended its offer to buy the shares in Irish-listed oil explorer Dragon Oil that it does not own after failing to get enough support from minority shareholders.

It is understood that ENOC has no immediate plans to change its current offer.

Dubai-based ENOC, which owns 54pc of Dragon, 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).

So far ENOC's offer has been formally taken up by 14.5pc of Dragon's total share capital, which represents just under 31pc of the voting rights held by minority shareholders.

ENOC said that it has also received notice of intended acceptances from an additional 2.3pc of the share capital of Dragon.

Under Irish takeover rules ENOC needs a majority of Dragon's minority shareholders to agree to sell for the deal to go through.

The two companies have agreed terms and the takeover offer was due to close yesterday, but this has now been extended until August 28. ENOC plans to delist Dragon from both the Dublin and London exchanges if its takeover bid is successful.

The takeover deal has received strong criticism from a number of dragon's largest minority shareholders.

UK investment management firm Baillie Gifford, UK-based Elliott Advisors and Ireland based Setanta Asset Management, who own 7.2pc, 5.2pc and 3pc of shares respectively, have all said that the current undervalues the oil producer.

Earlier this month ENOC called for Dragon to scrap dividend payments to shareholders, saying that it wants to sustain Dragon's current levels of oil production.

When it was announced, Goodbody Stockbrokers said that the move amounted to a "thinly veiled threat" to shareholders reluctant to sell their stake in dragon.

Goodbody Stockbrokers analyst Gerry Hannigan said that the extension of the deadline for the share offer may be an indication that ENOC's previous push to get rid of dividend payments may have strengthened resistance to the deal among some shareholders.

"The reason that the offer was extended was because ENOC didn't get the level of acceptance that they were hoping to get [and] that goes back to the fact that some shareholders think the company is undervalued," he said.

"Production at Dragon has gone from 20,000 barrels of oil a day in 2006 to 100,000 and they probably think it doesn't look like topping out immediately.

"I think if anything the dividend proposal has probably antagonised them [and] I think if they [ENOC] were trying to scare people off then it didn't work."

ENOC declined to comment on the extension when contacted by the Irish Independent. Baillie Gifford and Setanta also declined to comment.

ENOC first approached Dragon about a possible acquisition of the stake it didn't already own in March, when it put forward a possible offer of 650 pence a share before making a revised possible offer of 735 pence per share in May.

It increased its offer again to 750 pence per share in June.

Irish Independent

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