Potential bidders probe takeover options at D1 Oils

Nov 16 2009 by Karen Dent, The Journal

BIOFUELS company D1 Oils says it has received "a number" of approaches about taking over the business, which was founded by North East entrepreneur Karl Watkin.

D1, which moved out of biofuel production last year when it shut its refineries in Middlesbrough and Merseyside with the loss of 90 jobs to concentrate on the jatropha crop, confirmed it was in an “offer period”.

It said in a statement that it was “in receipt of a number of preliminary and conditional approaches in relation to possible corporate transactions involving the company, which may or may not lead to an offer”.

D1 announced in July it was paying £0.5m to buy back the 50% stake that oil giant BP held in a jatropha planting joint venture with it, after it failed to find a third investor. The company made a net loss of £2.8m during the first half of its financial year.

Harry Boyle, a biofuels analyst with New Energy Finance, said the bid news has come at a “surprising” time.

“The outlook for jatropha biofuels seems as challenging as ever,” he said.

“BP quietly backing away from its joint venture with D1 earlier in 2009 was not exactly a vote of confidence in jatropha, and encouraging yields have not yet translated from laboratory to large plantation.

“It is also beginning to look as though jatropha can be grown on marginal land only with intensive fertiliser and irrigation use.

“However D1 does have a potential niche in community-scale projects and it did have £12m cash in the bank at August 31 – more than its current market capitalisation.”

He said he could not speculate on which companies may be interested in taking over D1, which is also looking to use jatropha by-products in animal feeds as well as in biofuels. D1’s share price increased on the back of its announcement to the Stock Exchange.

Vinay Bedi, divisional director at Brewin Dolphin in Newcastle, said: “The idea that there is more than one potential bidder gives some strength to the view that someone may take over the company.

“They’ve not made any indication about what price these approaches may be. There are three things that potentially can happen; one that there will be a bid at a significant premium to the share price, two that the bid has no premium at all and three, that no bid transpires.”