Enoc wins over key minority Dragon Oil shareholders with higher revised offer

Above, the Dzheitune (Lam) platform 28 at the Cheleken oil and gasfield in Turkmenistan’s Caspian Sea territorial waters. Courtesy Dragon Oil

Emirates National Oil Company yesterday increased its offer for Dragon Oil and won crucial support from minority investors who had been holding out for better terms.

By winning over two of Dragon Oil’s largest minority shareholders, Enoc has secured enough shareholder votes to privatise the company.

This brings to a close Enoc’s six-year battle to acquire the 46 per cent of Dragon Oil it did not already own.

The deal is also a victory for Baillie Gifford, the Edinburgh-based fund management firm that led the efforts in 2009 and this year to squeeze a higher offer from Enoc.

“As a shareholder in Dragon Oil for a number of years we have seen the company grow significantly,” said Richard Sneller, Baillie Gifford’s head of emerging markets, in a joint statement with Enoc.

“We are now pleased to support the revised offer of 800 pence, which we believe represents an attractive exit price.”

Baillie Gifford was Dragon Oil’s largest minority shareholder, holding just more than 7 per cent of its equity.

Enoc had offered 750 pence a share for Dragon Oil in mid-June, but Baillie Gifford and some minority shareholders argued that the offer undervalued the prospects of Dragon Oil's main asset, the Cheleken oil and gasfield in Turkmenistan's Caspian Sea territorial waters.

Last month, Elliott Advisers joined Baillie Gifford in opposing the offer. Elliott Advisers, a UK unit of the New York-based hedge fund group run by the billionaire Paul Singer, had built up a stake of more than 5 per cent in Dragon Oil.

“We appreciate the open and constructive dialogue that we have had with Enoc. We are pleased that we are able to support the offer and encourage other shareholders to do so,” Enoc’s statement quoted Elliott Advisers as saying.

Enoc extended its deadline for its offer to the end of this month when it failed to secure the required votes for its 750 pence buyout offer by the original deadline last Friday.

But its advisers, led by Barclays Bank, continued talks over the weekend with Dragon Oil’s dissenting shareholders who still held a collective equity of just over 29 per cent.

The revised offer is worth an additional £17 million (Dh97.5m) to Baillie Gifford, which owns nearly 35.5 million shares. In all, Baillie Gifford will realise about £284m for its stake, which was valued at £180m in April before Enoc said it was considering making a buyout offer.

Saif Al Falasi, Enoc’s chief executive, said the offer was now unconditional in all aspects.

“I would like to thank all shareholders for their ongoing willingness to engage in a dialogue with us, enabling today’s outcome to be achieved,” he said.

“We look forward to taking operational control of Dragon Oil and integrating the company into the Enoc group, moving another step closer towards creating a fully integrated oil and gas company.”

Enoc said it would begin the process to delist Dragon Oil and any remaining shareholders can accept the 800 pence offer until August 28.

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