April 4, 2018 / 6:10 PM / 21 days ago

Norway's DNO raises Faroe Petroleum stake to 25.4 percent

OSLO (Reuters) - Norwegian oil firm DNO increased its stake in Faroe Petroleum to 25.4 percent on Wednesday, after announcing earlier in the day that it had bought a 15.4 percent holding in the British company.

DNO bought the initial stake from Israel’s Delek Group and said after the market close that it would offer to buy up to 10 percent of Faroe’s shares from other shareholders, although it does not plan a full takeover.

Britain’s takeover code dictates that a firm publishing a “no intention to bid statement” must refrain for at least six months from crossing the 30 percent ownership threshold, at which an obligation to make a mandatory offer is triggered.

The Norwegian firm returned to the North Sea last year after years of expansion in the Middle East, with the aim of growing via acquisitions and other investment.

“DNO now has decided to build a long-term strategic shareholding in Faroe Petroleum and to support Faroe Petroleum management’s growth-focused North Sea strategy,” it said.

Faroe earlier in the day announced it had made significant discoveries in its Hades and Iris exploration prospects offshore Norway.

A source close to Faroe said the company expected DNO to seek to appoint at least one new member to the Faroe board. The Norwegian firm was not immediately available for comment.

Faroe’s shares closed 12.2 percent higher at 1.178 pounds on Wednesday, having hit a four-year high of 1.204 pounds during trading hours.

To buy the 25.4 percent stake, DNO paid a 19 percent premium to the shares’ closing price on Tuesday.

“The Faroe Board considers that the GBP 1.25 per share price at which DNO purchased the Faroe shares from Delek substantially undervalues the company and its prospects,” Faroe said in an earlier statement.

Following DNO’s share purchase and the North Sea discoveries, investment bank BMO Capital Markets raised its share price target for Faroe to 1.50 pounds from 1.25 pounds and repeated an outperform recommendation.

DNO shares closed down 1.6 percent.

Reporting by Terje Solsvik in Oslo and Shadia Nasralla and Ron Bousso in London; Editing by Alexandra Hudson and Susan Fenton

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