Details of Scheme of Arrangement, Strategic background
• Dragon published yesterday the details of the Scheme of Arrangement for the offer at
455p announced on 2 December. The critical step is the Court Meeting and EGM of
Dragon shareholders which are scheduled for 10.00 and 10.15 on December 11th
respectively, at the Grosvenor House Hotel in London. For more details of the Scheme,
please also refer to our note of 4th Nov “Slaying the Dragon ? Not for 455p !”
• ENOC needs to achieve 75% of the minority votes by weighting and 50% of the number
of votes cast. While the decision to hold the meeting in London rather than in Ireland
may appear to place an obstacle in the way of smaller Irish retail investors, voting may
be done by proxy up to 48 hours before the Court Meeting. We continue to believe that
the vote will be tight, as already indicated by the statements of rejection issued by some
of the major shareholders, and the failure of ENOC to respond by even a small increase
in the bid strongly confirms our position from the outset of the offer that the 455p
reflects what ENOC can afford to pay, not what the assets are worth.
• The statement repeats that ENOC has undertaken not to sell its shares in Dragon until
at least August 2009 (August 2010 -Ed). Originally highlighted as a positive signal that ENOC would not
flip the shares, the consequence of this agreement has been that the Independent
Committee has been unable to engage with other parties, effectively ruling out any
assessment of alternative value for shareholders. We understand that if the offer
lapses, this undertaking may also become void and ENOC could sell its stake at a
higher price. We believe this has significantly greater potential for shareholders.
• We note that the newsflow from Turkmenistan on the day of Dragon’s statement
yesterday continues to highlight the significant strategic attraction of assets in the
region, with the following items in the trade press:
o Oil and Gas Minister Oraznur Nurmyradov told a conference in Ashgabat that
Turkmenistan plans to boost natural gas output almost four fold to 250bcma
by 2030.
o Head of State hydrocarbons resouces agency told Reuters that Turkmenistan
is interested in working with “western partners” for investment in LNG plants
o US State Department has offered to help Turkmenistan and Azerbaijan
resolve territorial disputes in the Caspian, facilitating future energy projects,
including the Nabucco pipeline exporting gas from Caspian to Europe
o Reuters report that Chevron is in talks with Turkmen government about
participation in the giant South Iolotan gas field (which would be critical for
the 250bcma target above).
• ENOC portrays itself as the only game in town and therefore hopes to capture the
Turkmen assets at a considerable discount. We maintain that ENOC is far from the
only option for shareholders to realise value, either through the strength of
independent cashflows or exploiting the considerable interest in accessing the region,
as just the news items from yesterday continue to highlight. We continue to
recommend that shareholders reject the offer from ENOC and vote against it on or
ahead of the 11 December.
Peter Hutton +44 207 071-5227 peter.hutton@ncb.ie