DNO offer fails to secure sufficient acceptances, moves to mandatory offer

ABERDEEN -- The board of Faroe notes the announcement by DNO ASA on Jan. 3, 2019 that it has received acceptances of its unsolicited offer for the entire issued and to be issued share capital of Faroe not already owned by DNO at 152p per share in cash of 48, 986, 566 Faroe shares, representing approximately 13.1% of the existing issued share capital of Faroe. The board also notes that DNO has this morning purchased a further 372,890 Faroe shares, taking DNO’s total share of the existing issued share capital of Faroe to 30%, and has moved its Offer to a mandatory cash offer.

The board notes DNO’s failure to secure sufficient acceptances for its offer to be declared unconditional by the first closing date of Jan. 2 2019 and reiterates the board’s position that DNO’s offer price of 152p per share is opportunistic and substantially undervalues Faroe. This is further reinforced by the independent valuation report on Faroe’s assets by Gaffney, Cline & Associates (“GCA”) that Faroe published yesterday, which implies a valuation for Faroe in the range of 186p to 225p per share.

The Board further notes that DNO has chosen to extend its offer until 1:00pm London time on Jan. 18, 2019 at the same offer price of 152p per share, clearly suggesting that it has every intention to pursue its unsolicited offer despite its earlier statements raising the prospect that the offer may lapse if sufficient acceptances were not received by the first closing date of Jan. 2, 2019. DNO’s further market purchases also highlight this.

The board is concerned at DNO’s increasing attacks on Faroe’s outstanding exploration track record and its implied criticism of our technical team which boasts one of the best exploration track records on the NCS.  It is a particularly puzzling criticism given that Faroe would provide DNO with a high quality, full cycle and diversified North Sea asset base that stands in stark contrast to DNO’s existing business. In fact, DNO’s statement that it is “not going away” demonstrates the attractiveness of Faroe to DNO.  As such, Faroe would solve DNO’s strategic challenges and shareholders should receive an appropriate premium which is not currently reflected in DNO’s Offer.

The Board reiterates the following observations in relation to the Offer timetable, as established by the UK Takeover Code:

• DNO has until Jan. 27, 2019 to improve or otherwise change its Offer, should it wish to do so
• DNO has until Feb. 10, 2019 to achieve sufficient acceptances for its Offer to become unconditional
• If the Offer at any time becomes or is declared unconditional, DNO must keep it open for acceptance for at least another 14 days

Shareholders are encouraged not to take any action in relation to the offer and not to sell their shares in the market. Shareholders who sell their shares in the market or to DNO would not receive any increase in the offer consideration should DNO revise its Offer.