Norway-based oil producer DNO ASA has extended its acquisition offer to U.K.-based producer Faroe Petroleum PLC despite the latter's higher demand based on an independent valuation report.
In a statement released Jan. 3, the board of directors of Faroe said DNO decided to extend its unsolicited offer until Jan. 18, at the same price of 152 pence per share in cash for around 49 million shares, which represents 13.1% of Faroe's existing share capital. DNO earlier targeted a closing date of Jan. 2.
Faroe said DNO has until Jan. 27 to change its offer. It also advised shareholders not to sell their shares in the market should DNO present a higher offer.
Faroe raised concerns with DNO's attack on its exploration track record and its criticism of its technical team in the Norwegian Continental Shelf.
The company stressed the acquisition will provide DNO with a diversified North Sea asset base.
Faroe's board reiterated the offer is opportunistic and undervalues the company. Citing a report conducted by Gaffney Cline & Associates, Faroe said Jan. 2 its assets was valued at US$879 million to US$1.08 billion, or 186 pence to 225 pence per share, which is 22% to 48% higher than DNO's offer of 152 pence per share in cash.
Faroe added the valuation does not cover the Equinor asset swap due to the deal's non-completion, the firm's scarcity value in the current tight upstream merger and acquisition market especially on the Norwegian Continental Shelf, or the management's track record in exploration and the benefits it will bring to DNO especially with its diversified North Sea business.
DNO also acquired 373,000 Faroe shares on Jan. 3, which hikes its stake in the company to 30%.