Dragon Oil shareholders reject $1.9bn ENOC deal

Some institutional shareholders said they felt the deal was opportunistic, and some analysts told investors to hold out for a higher bid.

The minority shareholders of Dragon Oil have rejected a US$1.9 billion (Dh6.97bn) deal for Emirates National Oil Company (ENOC) to buy the 48 per cent of Dragon that it does not already own. Despite Dubai's indebtedness, ENOC, the Dubai government-owned petroleum refining and marketing company, had agreed to purchase the Dragon shares for 455 pence a share in a bid that valued the Turkmenistan-focused oil producer at £2.36bn (Dh14.15bn). The deal, however, was contingent on the support of the holders of at least 75 per cent of remaining Dragon shares.

"Since the resolution was not passed by the required majorities, the acquisition will not take place," Dragon said in a statement yesterday, following the shareholder vote. Nigel McCue, the chairman of the independent committee of Dragon's board that recommended the deal, acknowledged the result. "It was a full cash offer from the company's majority shareholder that we believed fairly valued the assets and prospects of Dragon Oil and was at a significant 34 per cent premium to the price of Dragon Oil's shares before ENOC first indicated their interest. Nevertheless, the offer has been rejected and my colleagues and I accept and respect the decision without reservation," he said.

ENOC's proposed acquisition of Dragon, which was announced before the controversial debt restructuring at government-owned Dubai World affected international markets, would have been the first large-scale acquisition by a Dubai government entity in more than two years.

ENOC officials were unavailable late yesterday. Previously, the company had said it would not sweeten its offer. Dragon's stock fell sharply on the London Stock Exchange after the announcement. At 3pm GMT, the company's shares were priced at 374p, down 19p or 4.8 per cent on the day. @Email:[e-mail]