Emirates National Oil Co. (ENOC) agreed to buy Dragon Oil Plc for 1.7 billion pounds (US$2.6 billion), gaining control over wells in Turkmenistan and exploration projects from Algeria to Iraq.
ENOC, which already holds 54% of Dubai-based Dragon, will pay 750 pence ($11.62) a share for the rest, it said Monday in a statement. That’s a 47% premium to Dragon’s closing price on March 13, the business day before their talks were initially disclosed, and 15 pence (23 cents) more than it proposed in May.
While focused mostly on Turkmenistan, Dragon is working to expand outside Central Asia in a bid to raise oil production to 100,000 barrels a day (bbl/d) by next year from almost 79,000 bbl/d in 2014. The company, which has exploration assets in Iraq, Algeria and the Philippines, also won consent from the Egyptian authorities last year to search for oil in the Gulf of Suez.
Dragon jumped as much as 9% in London trading, and was up 8.1% at 724.5 pence ($11.23)as of 8:25 a.m. local time. The stock has gained more than 40% since March 13, valuing the company at 3.56 billion pounds. ENOC’s offer values it at 3.7 billion pounds.
An independent committee of Dragon’s board has recommended the bid, according to the statement. ENOC, also based in Dubai, will finance the acquisition from current cash resources.
Dragon reported sales of $1.09 billion last year. The company had free cash flow of $286 million, 25% lower than in 2013, according to data compiled by Bloomberg. It had $1.97 billion of cash and equivalents as of Dec. 31.
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