The move paves the way for resource-hungry South Korea to take control of Dana's reserves in UK North Sea and Egypt, helping to secure oil supplies for the import-dependent Asian country.
In a reversal of its previous rejection of the bid, Dana urged its shareholders to accept Korea's GBP18 ($28.26)/share offer, taking KNOC's three month-long struggle for control of the company one step closer to conclusion.
North Sea-focused Dana had repeatedly rebuffed KNOC's offer on the grounds that it undervalued the company by up to $1 billion.
Dana's U-turn came after the Korean company revealed that it now controls a majority stake in the independent, holding shares or acceptances representing 64.26% of the company's existing stock by midday September 23.
KNOC said it has waived the 90% acceptance requirement that it initially set and extended the offer for Dana's shares until further notice.
Should it acquire 90% or more of Dana shares, KNOC said it intends to acquire compulsorily the remaining Dana stock and de-list Dana from the London Stock Exchange.
Prompted by its bankers, Dana responded saying now accepts there are "risks" to its shareholders if they remain minority shareholders in the company.
"In light of KNOC's stated intention to de-list the company, today we are reluctantly recommending that shareholders accept KNOC's offer because we believe that this is now in the best interests of the significant number of Dana shareholders," Dana said in a statement.
The company said it now hopes to "work closely" with KNOC to ensure its production, development and exploration projects continue to move forward.
On Thursday, the UK's competition authorities gave their approval to KNOC's takeover of Dana, removing one potential obstacle to the deal.
"We believe KNOC will soon update the market on its near-term plans to complete this acquisition and we do not envisage any material hurdles to prevent KNOC completing the deal," CitiGroup said in a note.
The investment bank said it believes Korea's offer represents a "good price" for Dana, echoing similar comments by other oil market watchers.
FAILED DEFENSE
Aberdeen-based Dana was first approached by KNOC for "friendly" takeover talks in early June but the two sides failed to agreed a value for Dana's assets. The initial approach was with an offer of GBP17/share, which it subsequently raised to GBP18/share in mid-July, valuing the company at around $2.9 billion.
The company put together a heated defense to persuade the market of its value, claiming it was worth up to $3.9 billion based on its own oil output forecasts, asset portfolio, and exploration progress.
But KNOC refused to budge on price and took its offer hostile on August 20 with the backing of almost 49% of Dana's shareholders.
KNOC, which is spearheading upstream oil projects abroad for South Korea, currently has stakes in only one block in the UK and one block in Libya.
Most of Dana's production comes from the UK North Sea, but the company's exploration portfolio includes acreage in the Faroe Islands, Norway, the Netherlands, Egypt, Guinea, Senegal, Mauritania and Morocco.
Dana ended 2009 with proven and probable oil and gas reserves of 223 million barrels of oil equivalent, and expects its production this year to average between 37,000-41,000 boe/d.
In a bid to strengthen KNOC's position when it goes shopping abroad, the South Korean government last year decided to inject cash and raise its assets to Won 30 trillion ($25.5 billion) by 2012, from around Won 10 trillion currently.
South Korea, the world's fifth-largest crude buyer that imports almost all of its oil, is relying heavily on KNOC to raise the country's energy self-sufficiency ratio from 9% in 2009 to 18% in 2012 and 40% by 2030.
China Chemical Weekly: http://news.chemnet.com/en/detail-1411716.html
