Dragon Oil investor rejects ENOC bid

Oil producer Dragon Oil’s largest independent investor the asset management firm Baillie Gifford, has said an increased takeover offer from majority owner Emirates National Oil Company (ENOC) “materially undervalued” the company.

ENOC, which owns 54% of Dragon Oil, raised its bid to buy out minority shareholders to 750p (1,045c) per share on Tuesday, valuing the stock it does not already own at about £1.7bn and an overall takeover at £3.7bn; up from a previous proposal of £3.6bn.

Baillie Gifford, Dragon’s second-biggest investor after ENOC, with a 7.2% stake, said the improved offer does not fully value the firm’s growth potential. The move sets the stage for other significant minorities to hold out for an improved bid, said Alex Olvera, event driven analyst at Makor Securities.

Baillie Gifford said yesterday that it had offered to discuss the possibility of ENOC including a contingent payment note to shareholders as part of the deal.

The note would pay out if production from Turkmenistan’s Cheleken contract area, Dragon Oil’s only producing field, hits certain milestones, Baillie Gifford said. Dragon Oil said it expects production at Cheleken to plateau at 100,000 barrels of oil per day for the next five years. A spokesman for ENOC maintained that the offer was a fair one.

“The offer price was derived based on extensive feedback from numerous shareholders, and the independent committee of Dragon Oil,” the spokesman said. The current round of bidding is ENOC’s second attempt to buy Dragon after failing to acquire it in 2009.

Reuters