KNOC | DANA Takeover Bid - KNOC Makes Preliminary Approach. | Hannibal

-->

1st Jul '10 by hannibal

847 comments 208997 reads

Hot off the press:

http://www.ft.com/cms/s/0/2bee2044-852f-11df-9c2f-00144feabdc0.html
http://www.sharecast.com/cgi-bin/sharecast/story.cgi?story_id=3551412
http://online.wsj.com/article/BT-CO-20100701-710080.html

Unlock with Email

Unlock with Google

Already have an account?
Login here

About the Author

Hannibal

Premium Member

847 comments

nigelpm

16th Sep '10

No matter how much we might wish things to be different I have a feeling this state-of-affairs may last for years.

The fact that you are not alone in thinking this is probably why the big money over the next few years will be made by LTBH and not furious trading. Just looking at GKP and Encore over the past few weeks is testimony to that.

KingMcKong

16th Sep '10

I'm out, but not too happy!

Having bought from 260p upwards I can hardly complain, but the price isn't exactly a triumph.

The big question is where to invest next!

Goodbye Burren, Paladin, Venture... all good stuff...but hey!, the list is shrinking.

Still in DGO and MRS (serial disappointer)

By the way, I hope you are all considering coming to the Scottish Social on Wednesday 3 November, following the afternoon session of the IC Roadshow in Edinburgh.

Please say so on the relevant thread in 'another place' (if you're still allowed on :-) Otherwise an e-mail to me please

KMcK

Isaac

16th Sep '10

KMcK

Welcome to Stockopedia. I'm very glad you joined and hope you share your wisdom on these boards.

Just need to convince WShak and Bertee now....

nigelpm

16th Sep '10

Welcome to Stockopedia. I'm very glad you joined and hope you share your wisdom on these boards.

Just need to convince WShak and Bertee now....

TMF is still more active for non-oil stocks.

marben100

16th Sep '10

Hi Bugs,

Future production counts for almost nothing i.e there' a huge discount for future earnings - and we can see this effect on several other shares that we know well.

Funnily enough, when I see that, it leads me to the opposite conclusion to you: that's an excellent opportunity to buy & hold! If and when the earnings actually materialise and the market DOES recognise them, there's a great gain to be made. Norseman Gold Plc (LON:NGL) was a prime example of this last year, where it became clear a) that the company was hitting production targets; b) a strong A$ gold price would turn what had been a loss making operation, possibly on the verge of bankruptcy, into a highly profitable one [it went on to make an annual profit of around 5x the value of the market cap. when the shares were trading at 2.25p! IIRC]. Luckily for me, the market took longer to appreciate this than I did, allowing me to buy in when the SP was 2.25p. It now stands at over 40p - but I didn't have tournesolf's confidence and sold around half when it more than doubled within 3 weeks (and sold more on the way up - I'm out now). Nevertheless, I'm satisfied with a fivefold gain overall within a year. :0) I am not prepared to let any holding dominate my portfolio - the risk is simply too large, no matter how much I like the company and its management. There are always "unknown unknowns".

It takes a lot of detemination to hold when the market disagrees with you but, boy, do you get rewarded when it gets proved wrong by results and changes its mind! Of course, as Timarr warns, you have to be careful of hubris and need to do sufficient work to be confident that the market doesn't know more than you do - which, sometimes, it does! ;0)

Good to see the old Silverback here. :0) [sadly, doubt I'll be able to make it up to Edinburgh, though]

Mark

kirkie001

17th Sep '10

According to FT Alphaville, KNOC have grabbed a 29.9% stake in the market this morning.....

thegreatgeraldo

17th Sep '10

Schroders have just announced that they've got rid of 10.5 mill shares this morning, so quite possibly FTA were right for once!!

djpreston

17th Sep '10

Well it will be interesting to see who supplied the stock - if it was just those covered by the LoI's then not a lot has changed but if its other parties, add them to the LoI's and it looks lie KNOC are possibly home and dry.

oilretire

17th Sep '10

http://www.investegate.co.uk/article.aspx?id=201009171231268971S&fe=1

KNOC with ~29.5% today.......

djpreston

17th Sep '10

Well there it is - 29.5% acquired:

KNOC announces that it today acquired, subject to settlement, 27,297,954 Dana

Shares, representing approximately 29.5 per cent. of the issued share capital of

Dana, from Dana Shareholders at a price of 1,800 pence per Dana Share.

Dana Shareholders are encouraged to accept the Share Offer immediately and, in

any event, by no later than 1.00pm (London time) on 23 September 2010.

The procedure for acceptance of the Offers is set out on page 6 and in

paragraphs 15 and 16 of Part I of the Offer Document.

Terms defined in the Offer Document have the same meaning when used in this

announcement.

*KNOC's Share Offer of 1,800 pence per Dana Share is full and final and will not

be increased save that KNOC reserves its right to increase the Share Offer if a

competitive situation arises (including if a third party announces an offer or

possible offer for Dana).

Enquiries:

emptyend

17th Sep '10

So.....

KNOC announces that it today acquired, subject to settlement, 27,297,954 Dana

Shares, representing approximately 29.5 per cent. of the issued share capital of

Dana, from Dana Shareholders at a price of 1,800 pence per Dana Share.

....so....how exactly does this work then?

They've acquired 27+mn shares.....and they have paid the full 1800p per share. However, volume showing on the LSE is a mere 1.3mn and, more seriously from my standpoint, I had a order in the market all day to sell 10% of my shares at a price of 1795p.......and the shares never got above 1793p.......so.......

.....is this formally a two-tier market now then, where the mates of KNOC who provided cover for their bid get taken out early at £18, whilst the rest of us can't even get a fill at 1795p or have to wait weeks for the money?

I'm liking the way this bid has been conducted less and less with every day that passes!

thegreatgeraldo

17th Sep '10

Doubt you'll get a chance to savour spaniel & poodle kebabs at the party celebrating the bid victory either

davjo

17th Sep '10

Reflecting on the disappointment expressed as to KNOC's offer(takeout) price, I'm wondering whether private investors are missing a trick here. SirL has implied that Dana left itself vulnerable by failing to communicate fair value to the city. I don't think that's the case at all. I think the city simply has a different idea of value than PIs, after all, Schroders, with support of other major funds, emphasised the point that £18 was full and fair in their opinion. Why should they say that if they didn't mean it?(no conspiracy theories please). How were they to judge if they didn't have the sort of reserves info etc. that SirL was calling for? The answer must be that they did. If SirL was managing the Schroder position and he rang up TC asking for a reserves update, do you suppose he'd be refused? Unquestionably not imo!

So why the disappointment? It's quite interesting to review SOCO's asset sales over the years to compare BB contributors expectations vs price achieved :-

Russia Aug 2001 : £35m. Speculation on TMF following the sale of AEX's Komi asset reckoned SOCO-Permtex was worth more per bbl for well argued reasons, maybe £50m.

Tunisia Nov 2004 : £13.5m. Previous speculative TMF estimates of £17.5m.

Mongolia Apr 2005 : $40m + $53m contingent (£49m total). £50-£100m in PI spreadsheets.

Yemen Feb 2008 : $465m. Nearest to PI expectations but still $35m short in some quarters.

Thailand Jul 2010 : $105m. Even several analysts were way out on this one.

Strikes me that PIs need to revisit their assumptions when valuing E&Ps. All these glib $/bbl figures plucked from thin air should be treated with a pinch of salt. M&A prices are the be all and end all measure imo. As to Dana, it is clearly nonsensical to claim the Suncor purchases are worth more than they've paid at competitive auction. In fact, it looks very much like the price they have paid isn't so far removed from KNOC's offer on a booked 2P basis. In respect of upside from explo/appraisal, of course pretty well all producing assets have a portion of this but what is the pure explo worth to the buyer of a company like Dana? Maybe Schroders did an analysis of Dana's explo record over the last say 10 years and found the investment showed a poor return in terms of newly discovered booked 2Ps and concluded the future didn't hold much promise with such record?

Given the above and Dana's strategic move to grow by acquistion via competitive auction over the last few years, you can understand Schroder and other instituitions thinking that Dana is paying through the nose to boost cashflow in order to invest in explo which they're not very good at, hence the game is up. I wouldn't be surprised if Schroders let it be known to the likes of ML a while back that they're looking for a sale and the wheels were set in motion. I think it's entirely typical of TC that he didn't see it coming because he completely lost sight riding aloft as king of the castle. IMO, KNOC were advised by those who know, that competitive bids for mish-mash assets were extremely unlikely.

Anyhow, the message I'm trying portray is that PIs need to downsize their expectations in respect of reserves/explo as valued in the marketplace through M&A. The price being paid by KNOC is fair value because nobody else wants to pay more. There's absolutely no reason to complain....as if it would get you anywhere ;-)

thegreatgeraldo

17th Sep '10

As to Dana, it is clearly nonsensical to claim the Suncor purchases are worth more than they've paid at competitive auction.

The key word is competitive. Without knowing who else was bidding, clearly the level of competition is unknown.

davjo

17th Sep '10

The key word is competitive. Without knowing who else was bidding, clearly the level of competition is unknown.

Do me a favour tgg, are you really suggesting the highest bid of £240m in an open auction didn't previously have anybody seriously nodding the price up? You'll be saying KNOC's offer was made without the benefit of competition next!

thegreatgeraldo

18th Sep '10

Do me a favour tgg, are you really suggesting the highest bid of £240m in an open auction didn't previously have anybody seriously nodding the price up?

As I said previously,

"The key word is competitive. Without knowing who else was bidding, clearly the level of competition is unknown."

If you have inside knowledge of the auction, clearlty you can shed some light on its competeitive nature, or lack thereof. Otherwise it sounds as if you're continuing your very dull agenda

AnonymousUser858

18th Sep '10

I'm often surprised by the way people confuse the general with the specific and vice versa. In the context of markets and investment that means they confuse stock specific situations with those that affect a sub-sector or larger sub-set of the market.

Quite a few people have pointed to the weakness in Dana's share price earlier this year as evidence that management lost touch with investors or suffered delusions of grandeur or simply were not doing their job properly. "If only those people in Carden Place had communicated better, the company's SP would have been less volatile and the opportunity for a well timed bid would not have arisen" goes the argument.

The proponents of this argument point to the fact that Dana's SP had fallen to 1050p or thereabout around the time of the AGM so KNOC's bid at 1800p represented an irresistible exit opportunity.

But, but, but.....

Look at other similar companies - that's not all that easy since VPC fell to an opportunistic, hostile bid which took advantage of SP volatility to present itself as generous. In fact I can only think of one similar company and that's Premier.

Look at Premier's share price. Earlier this year it was around 1025p. Today it is just shy of 1700p. Notice a surprising similarity to Dana? In fact if you superimpose the two charts you find a very close correlation between the two.

So what does this tell us? Would it be fair to criticise PMO's management as "out-of-touch"? as behaving "like the king of the castle" ? as being awful at communication with investors? Would it be fair to regard the SP before it was boosted by the KNOC on effect of the Dana bid as a proper reflection of asset value as communicated to the market?

Of course not. The weakness in the SP was not company specific. It was not the result of management shortcomings. It reflected the normal volatility of a volatile sector in a volatile market. It reflects the simple fact that Mr Market is NOT efficient but behaves in the stereotypically bipolar fashion much discussed by eminent investors.

KNOC's advisors simply waited for a low point and took advantage of investors inability to differentiate between company specific and more generalised circumstances.

If anyone disagrees then perhaps they can explain why Premier is so very different. ISTM that the main difference is that Premier management had built a less attractive company with less attractive assets. But that does not support the charges levelled against Dana does it?

Isaac

18th Sep '10

Tournesolf

Why are you spending so much time writing a post that defends Dana? It's a share. Shes gone. Dana does'nt love you. Let's move on....

Not really understanding why people are making such an effort in their posts and talking about Dana so much, I just think all this energy would be more useful if focused on looking for the next Dana....

davjo

18th Sep '10

If you have inside knowledge of the auction, clearlty you can shed some light on its competeitive nature, or lack thereof.

Your point is irrelevant to the price paid which was clearly the best available in the market. That's indisputable unless you think the sale process was rigged, which I imagine you don't? Of course, Dana or anyone else would expect to profit from such deal otherwise they wouldn't buy it, but it's only 'worth' what it'll fetch in the market and that's what some people are getting confused about.

Otherwise it sounds as if you're continuing your very dull agenda

Oh dear, and here's me thinking I was trying to shed light!!

repobear

18th Sep '10

Davjo is of course correct.

The price achieved was the best available in the market at the time.

The thumbs down he's receiving are, I presume, a reflection of disgruntled Dana holders venting their spleen about the price paid and not the accuracy of his message.

Just like those I got for comparing it to my experience of buying houses at auction, earlier in this thread.

It's time to move on and look for the next Dana, as Isaac said. I have been trying to tell you that for about two weeks. The more clued up amongst you would have begun that process on Monday, at the latest, I would have said.

If you didn't , and feel hard done, feel free to give this the thumbs down, but do me a favour and read my profile first.

Telling it as he sees it, comme d'habitude,

repobear

Unlock the metrics for all these stocks and more...

Take a free trial

Facebook Twitter Youtube Instagram RSS

This site cannot substitute for professional investment advice or independent factual verification. To use it, you must accept our Terms of Use, Privacy and Disclaimer policies.

Unlock the metrics for all these stocks and more...

Take a free trial

DANA takeover bid - KNOC makes preliminary approach.

Unlock the rest of this article with a 14 day trial

About the Author

Hannibal

847 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...