Faroe Petroleum fights off Norwegian suitor DNO

The advances of Norwegian oil and gas firm DNO have again been rebuffed by the board of Faroe Petroleum as the deadline for its hostile bid looms.

However the suitor, which has been rejected by several major shareholders, has managed to convince some investors as it slowly builds its holding in Faroe Petroleum, disclosures show.

Faroe today followed earlier protests against the bid with a circular rejecting the offer and urging shareholders “to take no action”.

It accused DNO’s 152p bid of substantially undervaluing Faroe in an offer due to expire on 2 January.

Analysts also pushed back against the offer, which represents a premium of one per cent to the three-month weighted average share price.

Mark Wilson, an analyst at Jefferies said the bid “materially undervalues the company,” instead proposing a 190p target price.

Meanwhile, analysts at Cantor Fitzgerald said: “We find little fault in management’s arguments, and despite recent weakness in oil markets we continue to believe that shareholders should receive better value for one of the sector’s most respected names.”

Critics accuse DNO of pouncing on the share with a lowball offer just as oil hit a 12-month low.

DNO could not be reached for comment.

“All eyes are now on 2 January when the offer closes,” Paul Mumford of Cavendish Asset Management, which owns a 1.38 per cent stake in Faroe, told City A.M.

As the markets enter their last few days of trading before the bid expires, some shareholders have accepted DNO’s offer and the Norwegians have built their minority stake from 28.22 to 29.90 per cent since last Monday.

Mumford, who does not intend to accept the offer, believes those who are selling their shares were likely short-term owners betting on a higher offer who are existing their positions before the Christmas break.

“We are going to make a great deal more money being Faroe shareholders than selling to DNO,” Mumford said, adding a recent asset swap with Equinor was a shrewd move.