(Alliance News) - Shares in Hardy Oil & Gas fell sharply on Monday, after the firm said a GBP3.7 million takeover bid by a shareholder "materially undervalues" the company.
Shares in the company were 16% lower at 5.05 pence each in London on Monday morning.
The company, based in Aberdeen, Scotland, said the 5.00p per share acquisition offer from Blake Holdings Ltd is a 54% discount to its 10.90p net asset value per share at the end of November.
Hardy Oil added that the proposed offer also represents a 15% discount to the firm's 5.75p closing price on November 22, the last trading day before Blake's offer period commenced, and a 17% discount to the company's 6.00p closing price this past Friday.
However, Hardy said its directors were unable "to give a recommendation to accept or reject the offer".
Executive Director Richard Galvin does not plan on accepting the offer, Hardy Oil said, though Non-Executive Chair Alasdair Locke and Non-Executive Director Peter Milne will accept the bid in the event that it becomes unconditional.
The offer will become unconditional should Blake hold more than 50% of Hardy Oil's shares.
In late November, Blake, an investment holding company chaired by Richard Griffiths, purchased 9.2 million Hardy Oil shares at 5.00p from Universities Superannuation Scheme Ltd, a UK pension scheme which is also a Hardy shareholder.
Griffiths, who has been an investor in Hardy Oil since early 2012, had an interest in 22.0 million Hardy shares prior to this purchase. This comprised 250,000 shares in his own name, 571,055 shares held by Blake and 21.2 million shares held by another controlled undertaking, Serendipity Capital Ltd.
He then conducted an intra-group transfer ensuring all of his Hardy stock is held directly by Blake, meaning the latter holds 31.2 million shares in the London-listed company, representing a 42% stake.
Under UK Takeover Code rules, Blake was required to make a mandatory offer for the Hardy shares it does not already own, at a price of 5.00p each. Blake said the offer was final, and will not be increased.
Should Blake's offer become unconditional, it could lead to a board reshuffle at Hardy. Both Locke and Milne would voluntarily resign from the Hardy board. Blake also proposed adding Michael Bretherton, one of its own directors, to Hardy's board.
Hardy added: "Shareholders should however note that given Blake's current holding of 42.2% of the company's ordinary shares, Blake has sufficient control so as to enable it to take action with a high degree of probability of success, to appoint new directors to the board or remove directors in order to gain control of the board."
Hardy also took aim at Blake's plans to pursue a delisting from London Stock Exchange trading, should its offer become unconditional.
Hardy said that a delisting would "significantly reduce the liquidity and marketability" of its shares and it would mean the company would not have the protection and regulatory oversight from the UK's Financial Conduct Authority.
Hardy added: "The board believes that, while the cancellation of Hardy's listing on the Main Market will save costs in the short term, it is not in the best interests of the shareholders."
By Eric Cunha; ericcunha@alliancenews.com
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