ENOC Hikes Dragon Oil plc Takeover Offer To 800p — Act Now!

Emirates National Oil Company has increased its offer for Dragon Oil plc (LON:DGO) to 800p. Shareholders need to act now or risk a total loss!

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Shareholder pressure appears to have paid off for investors in Dragon Oil (LSE: DGO). Emirates National Oil Company (ENOC) announced this morning that it has increased its offer for Dragon shares to 800p, a rise of 6.7% from a previous offer of 750p.

Shareholders who have already accepted the 750p offer don’t need to do anything. ENOC says that all acceptances will automatically be transferred to the 800p offer.

The new offer has the backing of Dragon’s two largest shareholders, Baillie Gifford and Elliott Capital Advisors. Between them, these two institutions own a 13% stake in Dragon. They have been using their voting power to argue for a higher payout.

The backing of these two investors means that ENOC will now own or have received acceptances for more than 75% of Dragon shares. This will allow ENOC to de-list Dragon shares, a process which the firm intends to begin shortly.

You need to act now

Any Dragon shareholder who has not accepted ENOC’s offer needs to act fast. The ENOC offer will only remain open until 3pm Dublin time on 28 August 2015.

After this time, you may be left holding unlisted Dragon shares which will be almost impossible to trade and effectively worthless.

In order to avoid this risk, Dragon shareholders need to accept the ENOC offer without further delay. Alternatively, shareholders can sell Dragon shares into the market, as long as the firm’s listing remains active. As I write, Dragon shares are trading at 799p, reflecting the certainty that the offer will now become effective.

Personally, I would simply sell my shares into the market today and receive instant cash, but whichever route you take, prompt action is necessary.

This is the final offer — there won’t be a higher bid.

Problems for sellers?

Dragon Oil has proved to be an outstanding investment for almost all shareholders:

Time period Share price gain
1 year 41%
5 years 87%
10 years 570%
Since listing (Jan 1999) 4,745%

Very few, oil stocks can claim gains like these, especially after the oil bear market of the last nine months.

However, until now, many long-term Dragon shareholders have preferred to receive Dragon’s generous dividend income and avoid the capital gain liability resulting from selling. This choice has now been taken away, as refusing to sell will probably result in a total loss.

This means that many Dragon investors could face a big capital gains tax bill for the current year.

If you expect to be in this position, it might be worth doing a bit of active portfolio management. Capital gains can be offset by losses, so if any of your investments have gone bad and you’ve been holding on in the hope things might improve, now could be a good time to sell instead.

Doing so could reduce your CGT bill, effectively reducing the size of your losses on any less successful investments.

New buying opportunities

In my view, having a large capital gains tax bill is a good problem to have, as it means your investments have been successful. 

And if your investment in Dragon has yielded a profit, the volatile conditions in the market at the moment could present some attractive new buying opportunities.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Roland Head has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

UK investors are piling into Vodafone! Should I buy this FTSE 100 stock?

This ultra-cheap FTSE 100 dividend stock has been very popular among retail investors lately. What might they be seeing in…

Read more »

Market Movers

This FTSE 250 value stock is up 11% today! Here’s what’s going on

Jon Smith explains why a FTSE 250 stalwart is shooting higher today on fresh news and talks through why this…

Read more »

Inflation in newspapers
Investing Articles

£276bn worth of reasons to invest in UK shares?

Our writer prefers investing in UK shares to holding cash. However, he acknowledges that this approach does carry some risks.

Read more »

Investing Articles

Here’s the latest growth and share price forecasts for Nvidia stock

Nvidia is due to report Q4 results towards the end of February. Should I buy the stock in anticipation of…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

Is the party over for the S&P 500 as Trump’s tariffs loom?

Donald Trump's planned tariffs have cast doubts on the future performance of the S&P 500. What should investors do now?

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Warren Buffett continues to invest in this well-known pizza company

Warren Buffett just bought another 1.1m shares in Domino’s Pizza. Should investors follow him into the well-known fast food company…

Read more »

Investing Articles

A £100 weekly income from a Stocks and Shares ISA? It’s possible!

Mark Hartley details how a combination of good stock picks and patience could transform a Stocks and Shares ISA into…

Read more »

Young black colleagues high-fiving each other at work
US Stock

Why Apple stock could be set to soar with the new Alibaba partnership

Jon Smith explains why a new deal relating to the Chinese market could be good news for Apple stock, not…

Read more »