Faroe Petroleum turns fire on low-ball hostile bid by Norwegian rival

Faroe Petroleum said on Wednesday that a hostile takeover bid from Norwegian energy firm DNO undervalued the company’s assets by up to 48% despite a recent slump in the oil price.

The company, led by Graham Stewart, said an independent asset valuation by oil consultants Gaffney, Cline & Associates valued its assets at between 186p and 225p, or $879 million (£690 million) and $1.1 billion, at the end of December. That was lower than a $1 billion to $1.2 billion valuation at the end of September when oil was around $80 a barrel.

Faroe chairman John Bentley said GCA’s analysis “clearly supports our view that DNO’s offer substantially undervalues” the company.

DNO, which owns just under 30% of Faroe, has tabled a 152p-a-share offer in cash for the company, which has been rebuffed by the board. The Norwegian business bought its stake in April and bid on November 27. It is set to reveal how many Faroe shareholders have accepted the offer tomorrow after a deadline of 1pm today.

It can then decide to extend the deadline or let the offer lapse if it fails to clinch enough support for the takeover.

On Friday, DNO urged shareholders to accept the offer. It labelled the bid “full, fair and even generous” and questioned whether it was “self-serving” for the Faroe board to reject the deal.

Faroe, which is advised by Rothschild, Stifel Nicolaus and BMO, was founded 20 years ago and has assets in Britain, Ireland and Norway.

Another oil and gas exploration firm, Ophir Energy, is also in talks about a takeover, it said today. Indonesian giant Medco is in talks with Ophir about a possible cash offer. Ophir shares spiked 35%. The company, which has most of its assets in Africa and Asia, has been listed on the London Stock Exchange since 2011 and was founded in 2004. Morgan Stanley and Investec are advising the group on the offer. A firm bid must be made by January 28.