Faroe admits defeat after DNO increases final offer

● Board members tells shareholders to accept despite ‘poor value’

Faroe Petroleum’s board has conceded defeat in its fight against a takeover bid by Norwegian oil explorer DNO.

Board members have told shareholders to accept the “final offer”, which values the company at £641.7million.

DNO said yesterday it had bought 32.2m shares, representing 8.65% of Faroe.

It means it owns or has acceptances for 52.44% of Faroe’s shares, making the offer unconditional. DNO reiterated its intention to retain the head office in Aberdeen, along with its other premises.

Faroe’s directors will accept the offer and told shareholders to do so.

On Tuesday night DNO lifted its bid to £1.60 a share, up from the £1.52 offered in November.

Faroe commissioned an independent report last week which valued its shares between £1.86 and £2.25.

Directors reiterated yesterday that the deal does not represent “fair value” and accused DNO of creating “considerable uncertainty” for the future of the company.

Should it acquire 75% of Faroe shares, DNO plans to delist the firm from the London Stock Exchange, reducing the marketability of Faroe shares.

It will also make changes to the board of directors, meaning there is “no assurance” Faroe will continue in its current corporate governance culture in line with UK practice.

In a statement, Faroe said: “The board recommends that, given the final offer will become wholly unconditional, shareholders should accept the final offer, as Faroe directors intend to do in respect of their own beneficial holdings.

“The board intends to work with DNO in the interim period to ensure an orderly transition of control of the company in the interests of all our stakeholders, including our shareholders and employees.”

DNO said £53m of the proceeds will be payable to Faroe directors, management and employees, while the rest will go to other shareholders.

Faroe expects DNO’s final offer to stay open for an additional 14 days, now closing on February 6, as it becomes “unconditional” under UK takeover code.

DNO’s final offer price represents a 27.2% premium to Faroe’s share price of 125.8p on November 23, the day before the pursuit was made public.

TAKEOVER: Norwegian explorer DNO has reiterated its intention to keep Faroe’s head office in Aberdeen but will make changes to the board