SKorea's KNOC makes hostile offer for Dana Petroleum

20th August 2010, Comments 0 comments

South Korea's state-owned Korea National Oil Corporation launched a hostile takeover bid for Dana Petroleum on Friday, becoming the latest Asian power to seek foreign assets to meet booming energy demand.

KNOC has offered to buy the British oil explorer, which has operations in Europe and north Africa, for about 1.87 billion pounds (2.3 billion euros, 2.9 billion dollars), it said in a statement.

The South Korean company added it has already won the support of nearly half of Dana's shareholders -- and is now taking its 1,800-pence-per-share takeover bid directly to investors after failing to secure management backing.

The development marks the first time that a state-owned Asian oil firm has launched a hostile takeover of a British company and comes amid a flurry of global mergers and acquisitions activity in recent days.

"KNOC today announces the terms of a cash offer to be made for the entire issued and to be issued ordinary share capital of Dana," the group said, adding that 48.62 percent of investors already backed the bid.

Dana, based in Aberdeen, northeastern Scotland, has interests in 36 producing oil and gas fields, including in Egypt and the North Sea.

In response to the hostile bid, Dana released a brief statement which advised shareholders to take no action, adding that it would provide a full operational update in first-half results due next Friday.

South Korea is the latest Asian nation to seek expansion in the energy sector to meet booming demand after Chinese state firm Sinopec bought Switzerland-based Addax Petroleum for 7.2 billion dollars last year.

Industry experts forecast that Asia will drive global energy demand in coming years.

"Asia is a region that is expected to experience higher rates of growth than mature markets in the West for years to come," Westhouse Securities analyst David Hart told AFP.

"During this period, demand for energy will also grow as a result.

"So while security of supply may not be a significant worry now -- when economic growth world wide has yet to recover fully -- these deals are most likely being done with a view to the future."

KNOC originally offered 1,700 pence per share and then raised it to 1,800 pence -- but Dana management rejected the offer earlier this month.

In reaction to the latest news, Dana's share price rallied 5.66 percent to 1,791 pence in late morning London deals.

"We believe that our offer ... fully and fairly reflects all of Dana's recently announced and ongoing developments, together with its exploration potential," said Dr. Seong-Hoon Kim, senior executive vice president of KNOC.

KNOC expressed deep disappointment at failing to reach a friendly takeover deal.

"It has always been our desire to agree a recommended transaction with the board of Dana," KNOC said on Friday.

"We are very disappointed the board of Dana does not agree that 1,800 pence per share represents a full and fair value for the company."

The cash bid represents a 59 percent premium to Dana's closing share price on June 30, the day before KNOC's approach was revealed.

Analyst Job Langbroek at Davy Stockbrokers in Dublin said KNOC was keen to expand its asset base.

"The widespread interests of Dana, with producing projects in the UK and Norwegian sectors of the North Sea as well as Egypt, are attractive to KNOC as it seeks to meet its mandate of securing oil and gas assets for the Korean state," Langbroek said in a note.

"The offer and its tacit acceptance by nearly half of the existing shareholders in Dana will make it hard for the Dana management team to rebuff the Korean attention."

The Dana bid comes in a fast-moving week for global takeover activity.

On Wednesday, Anglo-Australian mining giant BHP Billiton launched a mammoth hostile bid for Canada's Potash Corp which valued the world's largest fertiliser producer at 40 billion dollars.

On Thursday, US computer chip giant Intel agreed to buy Internet security firm McAfee for 7.68 billion dollars.

London-listed miner Vedanta Resources has meanwhile offered to buy a majority stake in energy explorer Cairn India for up to 9.6 billion dollars.

© 2010 AFP

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