Oil producer Genel Energy (LON:GENL) has rejected a £202 million takeover offer from Norwegian energy giant DNO. The Scandinavian firm revealed it had approached the Genel board in late July with a cash offer which was turned down.
£202 million opening offer
According to the DNO press release, it approached Genel on 28 July with a possible cash offer of 69p per share. The price represented a 35% premium to Genel’s closing price on the day and values the firm at £202 million.
Genel owns and operates production assets in the Kurdistan Region of Iraq, and exploration assets in Oman and Somaliland. DNO is one of Genel’s partners in the Tawke field in Kurdistan.
DNO says its offer ‘provides certainty’ to investors as it fully values Genel’s assets. It also says the offer means ‘certainty of value’ in the event Genel’s proposed takeover of Capricorn Energy (LON:CNE) falls through.
In early July, Genel announced it had reached a ‘landmark’ deal to acquire Capricorn for $360 million. The Capricorn board recommended the deal, which it said was superior to rival offers.
DNO said despite the initial rejection, it was willing to engage with the Genel board. At the time of writing, Genel directors had yet to publish a formal response to the Norwegian firm’s announcement.
You have to hand it to DNO, they’ve been watching and waiting for Genel shares to hit bottom before making an approach. The 69p opening offer is fair, as they have to start somewhere, but we think they can and will go higher.
Genel has plans of its own and doesn’t need DNO’s backing. It has sizeable reserves in Kurdistan, and is drilling the ‘potentially transformational’ Toosan-1 exploration well in Somaliland.
Admittedly, Kurdish production was significantly impacted by the Middle East conflict after the firm cut output as a precaution. Activity isn’t yet back to normal, but the firm has plenty of liquidity in the meantime.
Then there’s the Capricorn deal, where the scheme of arrangement is due to be approved on 18 August. That will add significant assets in a region Genel has coveted for some time.
