KNOC Makes $2.9B Hostile Bid for Dana

LONDON (Dow Jones Newswires), Aug. 20, 2010

Dana Petroleum's shares rose Friday after Korea National Oil Corp. said it had secured support from investors for 48.62% of Dana's shares and that it's taking its bid directly to Dana shareholders.

KNOC's offer values Aberdeen-based Dana Petroleum at GBP1.87 billion (US $2.9B), KNOC said. The South Korean company is seeking at least 90% of Dana's shares, which it said would make the offer unconditional.

State-owned KNOC first approached Dana in July, but talks broke down earlier this month when they couldn't reach an agreement on price. Despite pressure from major investors, Dana's board has refused to recommend KNOC's 1,800 pence a share offer--a 59% premium to Dana's closing price on June 30, the last business day before KNOC announced its approach.

At 1045 GMT Friday, shares in Dana were up 5.7%, or 97 pence, at 1,792 pence, just shy of KNOC's offer price per share.

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

Letters of intent have been signed by several of Dana's largest shareholders, including Schroders Investment Management Ltd., BlackRock Investment Management (UK) Ltd. and JP Morgan Asset Management. With 15.5% of Dana's stock, Schroders is the company's largest investor.

Investors, many of whom are hedge funds which piled into Dana following the announcement of KNOC's approach in July, have become increasingly frustrated with the board's refusal to compromise on price.

"We believe Korea National Oil Corporation is offering a fair price for Dana Petroleum. We hope Dana's board will act in the best interest of its shareholders, who have clearly expressed their support for this transaction," Octavian Advisors Chief Executive Richard Hurowitz said Friday.

Octavian owns 0.77% of Dana's shares.

Responding to KNOC's statement, Dana advised shareholders not to take any action, reiterating that it would be giving "a full operational update on its current production, development and exploration activities and the near term business development program" at its interim earnings Aug. 27.

One investor suggested that Dana's update to be given alongside its earnings could include material information, already known to KNOC, and preventing the South Korean company from buying shares in the market.

The investor also suggested that KNOC could pre-empt Dana's earnings if it seeks and obtains confirmation from the U.K. Financial Services Authority that the information they have isn't material, freeing KNOC up to buy up to 30% of the Aberdeen-based company.

KNOC said it would have effective control of Dana Petroleum if it obtains more than 50% of Dana's shares and is already close to this, leading analysts and investors to suggest that the game is pretty much over and there isn't another bidder out there. "This is likely to be a done deal," said Oriel Securities analyst Nick Copeman in a note.

"Dana should argue its value case sooner rather than later and present any alternative proposals," said one investor.

The South Korean state-owned oil company's direct approach to Dana shareholders underscores industrialized Asian nations' strong desire to secure oil supplies worldwide. The acquisition of Dana Petroleum would give KNOC access to a resource base in Europe and North Africa.

KNOC's bid for Dana is part of an effort to raise its energy efficiency to 20% from 9% by 2013 and follows aggressive expansion of the company's assets in 2009.

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