Dragon Oil plc

Wednesday, 20 January 2010

Dragon Oil plc (“Dragon” or the “Company”)

This announcement relates to the failure by JP Morgan Asset Management (UK) Limited (“JPM”) to disclose its dealings under Rule 8 of the Takeover Rules in the securities of Dragon during the period 5 June 2009 to 4 December 2009.


Dragon initially went into an offer period on 27 March 2009 following an announcement by the Company that it intended to undertake a restructuring to change its country of registration from Ireland to Bermuda. Having regard to the nature of that transaction the Panel’s Disclosure Table indicated that disclosure of dealings in the securities of Dragon were not required under Rules 8 and 38.

On 5 June 2009 Dragon went into an offer period in relation to a possible offer from a third party following an announcement by Dragon that it had received an approach in relation to a possible offer. That approach was from Dragon’s majority shareholder, Emirates National Oil Company Limited LLC (“ENOC”). Following that announcement the Panel amended its Disclosure Table so that disclosure of dealings under Rules 8 and 38 would be required, in the normal way, from 5 June.

The proposed acquisition of Dragon by ENOC was to be effected by way of a scheme of arrangement which was subject, inter alia, to approval by Dragon shareholders (excluding ENOC) of the acquisition. Such approval required a majority in number of those shareholders representing 75% or more in value of the Dragon shares held by such shareholders present and voting either in person or by proxy. The Dragon shareholder base consisted of a large number of private shareholders who individually held relatively small numbers of shares. It was known that a number of these shareholders were not in favour of the proposed acquisition. The largest minority institutional shareholder then holding approximately4.2%publicly announced that they were going to vote against the acquisition. A number of other institutional shareholders subsequently made similar announcements. Consequently, there was some degree of uncertainty as to whether the acquisition would receive the level of shareholder support necessary to effect the acquisition. Given the circumstances, dealing disclosures were particularly important for investors and especially during the three-week period leading up to the shareholder vote.

Takeover Rules – Rule 8.3

Rule 8.3 requires persons with interests in relevant securities of the offeree (and in the case of a securities exchange offer, the offeror) representing 1% or more to disclose all dealings during the offer period. Such dealings should be publicly disclosed no later than 3.30 p.m. on the business day following the date of the transaction.

The Panel regards compliance with the dealing disclosure requirements of Rule 8.3 to be extremely important. The rationale for requiring persons who have 1% or more of any class of relevant securities in issue to disclose their dealings in an offer period is to inform shareholders as to where control of the company’s voting rights lies and to provide additional market transparency as to movements in the price of a company’s securities.

Panel ruling

JPM held an interest of 1% or more in the relevant securities of Dragon at the commencement of the offer period relating to the ENOC approach. During the period from 5 June 2009 to 4 December 2009 JPM dealt in relevant securities of Dragon on 113 occasions without making the disclosures required by Rule 8.3. No disclosure was made until 8 December (which included retrospective disclosure from 5 June) when JPM disclosed that they held a 4.24% interest in the securities of Dragon. The market however was aware that JPM had a shareholding in Dragon as a result of the release during the offer period of a number of TR-1 disclosures by Dragon following notification from JPM of their shareholding. JPM stated that due to a clerical oversight they had failed to notice the amendment to the Panel Disclosure Table on 5 June 2009 requiring disclosure of dealings from that date.

The Panel has ruled that the failure by JPM to disclose its dealings in the relevant securities of Dragon during the offer period relating to the ENOC approach was a breach of Rule 8.3. The Panel emphasizes the importance that all investors comply with the dealing disclosures under the Takeover Rules.

20 January, 2010