Global Insight Perspective | |
Significance | MOL has named the price of its bid for the 31% of Croatia's oil and gas firm INA. |
Implications | Taking over INA would see MOL strengthen its position in South-West Europe. OMV had also expressed an interest in bidding for INA. |
Outlook | The takeover could be a financial stretch for MOL, which may have implications for its share price. However, the deal is likely to be accepted by INA, leaving OMV standing. |
The Deal
MOL, which already owns 25% of INA, has offered 2,800 kuna (US$576.6) per share, or 1.2 billion euro (US$1.76 billion), for the 31% of the company not held by MOL or the Croatian government. The bid is lower than expected and values the whole of INA at 3.9 billion euro.
MOL first announced its plans for INA in July. At the time INA's market capitalisation of US$6.4 billion would have valued the available stake at around US$2 billion. That investment would have been a significant outlay for MOL, whose own market capitalisation is around US$14 billion. MOL has received approval from Croatia's financial regulator Hanfa to make the bid public.
MOL has also held talks with the Croatian government over acquiring some of its 44% stake in INA. Last week Croatia's prime minister Ivo Sanader said that a share swap between MOL and INA appeared to be the most probable course of action. Although Croatia does not want to lose control of its biggest energy company, the country's planned accession to the European Union (EU) in 2011 could force it to lower its stake in INA to 25% so as to comply with EU regulations.
Where is OMV?
OMV said in July: "Should there be a transparent privatisation process regarding INA, OMV would be interested to be invited." It has maintained that party line, but so far has not been proactive in boosting its own stake in INA.
The battle between MOL and OMV was a severe one, and bruised both companies, but in particular OMV. When OMV withdrew at the start of August the company was facing an accumulation of obstacles to the acquisition. The tipping point appeared to have been the European Commission (EC)'s rejection of OMV's proposed anti-trust solutions, leading the Austrian company to decide that it would no longer be able to meet its strict criteria of value creation from the takeover.
Outlook and Implications
Some analysts have said that MOL might have kept its bid low in order to limit its cash expense, as buying the free float and the government's potential 19% stake could cost close to 2 billion euro. This would stretch MOL financially. If OMV comes out from hiding and does battle with MOL over a stake in INA, that could push up INA's share price and make the situation much tougher for MOL.
However, as things stand the bid for the 31% stake in INA is likely to succeed and a deal with the government is expected to be concluded this month or in October.
Related Articles
Croatia: 15 July 2008: MOL to Launch Full Takeover of Croatia's INA as Battle with OMV IntensifiesCroatia - Hungary: 28 August 2008: MOL Likely to Make Share Swap in INA Bid