DNO Drops Pursuit of Genel Energy After 69p Proposal Rejected

DNO ASA has dropped its pursuit of Genel Energy, saying it does not intend to make an offer after Genel’s board refused to engage with a 69 pence-per-share proposal. The decision ends a month-long possible-offer process that had put the two Kurdistan-focused partners on opposite sides of a takeover approach.

The Norwegian producer said on September 4 that its wholly owned DNO Iraq AS unit would not proceed with an offer. DNO had first approached Genel’s board on July 28 and disclosed the approach on August 7. Its proposed cash price was 69 pence a share, with shareholders also offered a cash-and-DNO-share alternative. DNO said the cash proposal represented a 38% premium to Genel’s August 6 closing price.

Genel maintained its opposition after DNO walked away. The board said it had unanimously rejected the approach after consulting its advisers and remained of the view that the proposal fundamentally undervalued the company, its assets, financial position and prospects. Genel’s official offer-document page lists both companies’ announcements from the possible-offer period.

DNO walks away at the takeover deadline

September 4 was the formal deadline created by the U.K. Takeover Code after DNO identified itself as a potential bidder on August 7. The Takeover Panel’s disclosure table showed a 5 p.m. London deadline for DNO either to announce a firm intention to make an offer under Rule 2.7 or state that it did not intend to do so. DNO chose the second route, making a Rule 2.8 statement and bringing the offer period to a close.

DNO said it still believed the 69 pence proposal would have been attractive to Genel shareholders. Its argument rested on the premium to the undisturbed share price, an immediate liquidity option for investors in a relatively thinly traded stock and the chance for shareholders choosing DNO equity to participate in a larger producer with a dividend record. DNO also argued that combining the companies would have created a financially stronger business in the Kurdistan Region of Iraq, where security and commercial conditions have remained uncertain.

The two sides disagreed sharply over whether talks should have taken place. DNO said the Genel board had shown no willingness to engage despite repeated invitations and that it wanted the September 4 deadline extended to see whether a mutually acceptable proposal could be reached. Genel’s response was that the valuation was too low to provide a basis for engagement in the first place.

A Rule 2.8 statement does not make a future approach impossible in every circumstance. DNO reserved the rights allowed under the Takeover Code to set aside the restriction if Genel’s board agrees, if a third party announces a firm offer for Genel, if Genel announces certain specified corporate actions such as a reverse takeover, or if the Takeover Panel determines that there has been a material change in circumstances. On the facts announced Friday, however, DNO is no longer pursuing the company.

Genel points to cash and its Tawke stake

Genel used its September 4 response to restate the case for remaining independent. It cited last-reported cash of $240 million as of July 31, its 25% working interest in the Tawke licence and a pipeline of other potential opportunities aimed at diversifying future cash generation. Management also said a return to oil exports from Kurdistan could more than double revenue generation from Tawke compared with the current local-sales environment.

The Tawke relationship is one reason the takeover approach was strategically notable. DNO operates the licence and owns the other 75%. After precautionary shutdowns linked to regional security risks earlier in the year, DNO restarted production from the Tawke field on June 28 and from Peshkabir on July 11. In its second-quarter update, DNO said it was selling its entitlement oil at prices in the mid-to-upper $30s per barrel while continuing to seek access to export markets or export-linked pricing.

That shared asset ties the companies operationally even though their boards differed on valuation. DNO’s second-quarter figures also showed the scale gap between the groups: the Norwegian producer reported $760.5 million of quarterly revenue, $439 million of operating profit and net production of 88,430 barrels of oil equivalent per day. Genel, by contrast, has emphasized balance-sheet strength and the cash-generating potential of its minority Tawke interest while looking for assets outside Kurdistan.

The withdrawal removed the immediate takeover premium from Genel’s shares. In Friday afternoon trading, Genel was about 14% lower at 54.4 pence, according to Alliance News. That price was well below DNO’s abandoned 69 pence proposal and close to the level from which the bid premium had been built in August. The market move was an intraday reading, not a closing price.

Capricorn has become the strategic pressure point

DNO’s decision on Genel came only three days after it moved directly into another deal that had been central to Genel’s diversification strategy. On September 1, DNO announced an agreed cash acquisition of Capricorn Energy, the company Genel itself had already agreed to buy in July.

DNO’s Capricorn terms value each Capricorn share at $5.214, including a planned $0.99 special dividend, implying about $396 million for Capricorn’s fully diluted equity. DNO said that was roughly 10% above the acquisition value under Genel’s offer. Capricorn shareholders had approved Genel’s scheme on August 18, but Capricorn’s directors said after the DNO agreement that they intended to recommend DNO’s higher proposal and did not currently intend to ask the court to sanction Genel’s scheme.

The overlap matters because DNO explicitly connected the two situations in its September 4 statement. It argued that the 69 pence Genel proposal would have given Genel shareholders certainty regardless of the outcome of the Capricorn contest. If Genel fails to acquire Capricorn, DNO said, the company would remain without the diversification it has sought and would carry a general and administrative cost base that DNO considers high relative to Genel’s current scale. That is DNO’s assessment, not an agreed conclusion between the companies.

For Genel, the next strategic question is therefore no longer whether DNO will make a near-term offer for the company. It is whether Genel can preserve or replace the diversification opportunity represented by Capricorn while continuing to extract value from Tawke. Capricorn’s board has said DNO’s acquisition remains subject to shareholder approval and other conditions, with completion expected in the fourth quarter of 2026 or the first quarter of 2027 if those conditions are satisfied.