DNO’s Former Chairman Bids for Stake to Thwart RAK Merger

DNO International ASA’s former Chairman Berge Gerdt Larsen offered to buy as much as a third of the Norwegian oil producer’s shares to derail a planned merger with RAK Petroleum PCL.

Petrolia ASA, the oil-services company controlled by Larsen, said it offered 10 kroner a share in Petrolia stock for as much as 33.33 percent of DNO, according to a statement today. Following an agreement it would seek to achieve a minimum price of 12 kroner a share by selling or reorganizing the company.

“In order to maximize value for all DNO shareholders it is necessary for the company to be restructured, merged or potentially sold,” Oslo-based Petrolia said in the statement.

DNO agreed in September to merge with the petroleum units of RAK, its largest shareholder, in a deal valuing it at $1.64 billion, or 9.50 kroner a share, and the RAK units at $250 million. Larsen has said the agreement undervalued DNO.

DNO rose as much as 8.1 percent to 7.385 kroner in Oslo trading, the highest intraday price in almost five months. The stock was at 7.145 kroner as of 2:02 p.m. local time, trimming its decline this year to 21 percent. Petrolia jumped as much as 11 percent before trading up 3.6 percent at 0.58 krone.

Final Attempt

“We would advise shareholders not to accept” Larsen’s offer, Anders Holte, an analyst at ABG Sundal Collier Holding ASA, said in a note. “We believe this is a last attempt to derail the ongoing merger with RAK Petroleum and as such doubt the future value creation for DNO shareholders through owning Petrolia shares.” Holte has a “buy” recommendation on DNO stock and a target price of 7.50 kroner.

The proposed DNO-RAK merger was backed by 77 percent of shareholders at an extraordinary general meeting in Oslo last week. The result of the vote hasn’t “added any material value” for DNO holders, Petrolia said today in the statement.

DNO operates in Africa and the Middle East, where it has assets in Iraq’s Kurdistan region and in Yemen’s Sayun-Masila Basin.

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