Korea Oil's Dana bid shows Asian drive for energy
First hostile takeover attempt by company
Seoul : Korea National Oil Corp's $2.6 billion (Dh9.5 million) bid for Dana Petroleum Plc, the state-owned company's first hostile takeover attempt, shows South Korea is turning aggressive to lock up oil supplies after acquisitions by Chinese peers jumped eightfold in three years.
South Korean companies made 17 bids for foreign energy assets, including UK-based Dana, in the past 12 months, compared with 40 Chinese transactions, Bloomberg data show. The takeovers are being driven by demand for oil products, which the International Energy Agency forecasts will rise by an average 3.8 per cent a year until 2015 in emerging Asian economies.
Korea National Oil was outbid by China Petrochemical Corp. in the contest for Geneva-based Addax Petroleum Corp. last year, when China agreed to pay a 47 per cent premium to the prevailing share price. The company, known as KNOC, learned from the Addax loss, offering a 59 per cent premium for Dana in what would be South Korea's biggest overseas acquisition this year.
"Losing Addax to China became a kind of blessing in disguise for South Korea as it's become more aggressive in overseas acquisitions," said Cho Seung Yeon, an analyst at HMC Investment Securities Co. in Seoul.
Dana, based in Aberdeen, Scotland, said yesterday in a defense document that KNOC's £18-a-share (Dh102) offer would "utterly fail" to compensate its shareholders. Its board rejected the bid, saying Dana is worth at least 18 per cent more than KNOC's offer. Dana closed at £18.09 in London trading yesterday, a sign that some investors expect a better bid to emerge. KNOC said in response today that Dana's defense document doesn't contain any information that alters its view on the company's value. KNOC's £18-a-share offer is "full and final," it said.
South Korea, which imports almost all its energy needs, used 1.5 per cent more oil last year, according to the BP Statistical review of World Energy. China's oil consumption rose 6.7 per cent last year, while proven reserves in the world's biggest energy user declined two per cent in the past decade and will last 10.7 years at current production rates, according to the BP report.
"Asian oil companies are desperate," said Gordon Kwan, the Hong Kong-based head of regional energy research at Mirae Asset Securities Ltd. "They're not finding enough oil to replace what they're consuming."
Doubling production
Kang Young Won, KNOC's chief executive officer, said on Aug. 24 the company plans more acquisitions to meet a government target of more than doubling its production to 300,000 barrels of oil equivalent a day by 2012. That's about 10 per cent of South Korea's daily crude imports. Following a planned acquisition of UK North Sea assets from Suncor Energy Inc., Dana intends to boost production to about 70,000 barrels of oil equivalent by the end of the year.
