Investors hit back at DNO’s unchanged bid for Faroe Petroleum

Investors in Faroe Petroleum hit back at DNO’s hostile bid for the North Sea oil company today, calling it a “non-starter”.

Their comments came after the Norwegian suitor pushed on with its £610m bid, setting a deadline of 2 January for shareholders to accept it.

DNO, which is already Faroe’s largest investor, has offered 152p per share for the 72 per cent it does not own, a bid which the board last month rejected as substantially undervaluing the target.

But the bidder today stuck to its guns, saying the takeover gives shareholders “a rare opportunity to exit their relatively illiquid AIM-listed positions at an attractive price”.

However, investors, holding a combined stake of 8.1 per cent, who spoke to City A.M. backed the board’s position.

Cavendish fund manager Paul Mumford said he would be reluctant even if the bid rose to 225p per share. “It’s raspberries all around. The cash offer today is inadequate. Unless oil prices crash I think that [152p] is a non-starter,” he said.

Meanwhile, Jonathan Brown, a fund manager at top-five shareholder Invesco said: “We are just not interested in the current bid. It’s too low. They need to come up with a serious bid before we’d be even remotely interested.”

Rod Oscroft at Legal & General, another top-five investor, said the bid “completely fails to reflect the value that the Faroe management team has built over the last three years.”

Last week Faroe agreed an asset swap with Norwegian state oil firm Equinor in a move which could bump its value up. Mumford told City A.M. that the deal added around 25p to the fair price for each share.

Shares in Faroe closed the day up 0.26 per cent to 153.4p as management and the board again pushed back against the unchanged bid.

“DNO’s unsolicited offer ignores Faroe management’s proven track record and the company’s exciting independent future, which has been further enhanced by the recently announced Equinor asset swap,” the board said earlier today.