Global Insight Perspective | |
Significance | MOL has announced its intention to bid for all INA shares not currently held by the Croatian government as it seeks to fend off any move by OMV to take an interest in its key foreign partner. |
Implications | MOL has not revealed the details of its bid, although INA's share price values the 31% stake in the company not currently owned by MOL or the Croatian government at around US$2 billion. MOL shareholders appear to be thinking such a bid would overextend the company, however, with MOL's share price falling over 3% on the news. |
Outlook | MOL has 30 days to provide details of its offer; in the meantime, all eyes will be on OMV to see if the Austrian group moves to submit a competing bid for INA, a play sure to further escalate tensions with MOL. |
Shifting Battleground
The year-old conflict between Austrian oil and gas group OMV and its Hungarian counterpart MOL—triggered in June 2007 when MOL rejected a friendly offer to form a bilateral alliance with OMV, prompting a hostile takeover approach—has been fought on many fronts. The two companies have tussled at shareholders' meetings, clashed in a number of different court cases, and have both argued their case with the European Commission as it undertakes its assessment of the implications of OMV's potential takeover of MOL. Until now, however, the dispute has largely been contained within the companies' respective home markets of Austria and Hungary. This has now changed, with Croatia shaping up as the new battleground on which the disagreement is being played out.
MOL announced yesterday it would launch a bid for all the outstanding shares in Croatian state oil company INA not held by itself or the Croatian government. MOL has been in discussions with the Croatian government for some time on boosting its current 25% stake in INA, its prize asset outside of Hungary, but the timing of its announcement on a full takeover bid leaves few doubts over the motivation for its plans. The Hungarian company's statement follows a confirmation by OMV last week that it was interested in acquiring a 26% stake in INA through either a direct cash payment or a share swap arrangement. OMV's interest has clearly been interpreted by MOL as an attempt to gain influence over its assets and force a break in the current standoff, and as such, it has moved to head off any attempt by OMV to gain a foothold in the Croatian oil company. Such a motivation was alluded to in MOL's statement yesterday, with the company stating its public offer was intended both to express its commitment to INA and at the same time "limit further speculation in the market".
Bid Details to Come
MOL is yet to set the terms of its bid, although it indicated in yesterday's statement it was prepared to offer "a fair and realistic price to all shareholders of the company". The eventual offer will apply to 31% of INA shares, with 25% already held by the Hungarian company and a further 44% owned by the Croatian state. INA's current market capitalisation of US$6.4 billion would value the available stake at around US$2 billion. Such an investment would be a significant outlay for MOL, whose own market capitalisation is around US$14 billion. Furthermore, INA's share price, which has performed strongly of late and is likely to be pushed up further on account of the interest from both OMV and MOL, has raised questions as to whether MOL would receive value for money in expanding its stake. Such concerns have clearly troubled MOL investors, with the company's own stock value falling by 3.7% yesterday in the wake of the bid announcement, reaching a two-year low.
Outlook and Implications
Under Croatian regulations, MOL will now have 30 days to provide details on its offer to the country's financial markets authority HANFA. The regulator will then have 14 days to assess whether the bid is valid. However, attention is sure to shift back to OMV during this period in anticipation of the company's response. Initial signs indicate the Austrian group remains undeterred. "Should there be a transparent privatisation process regarding INA, OMV would be interested to be invited," the company said yesterday following the MOL announcement. As such, the stage could now be set for a further direct clash between OMV and MOL, as they both seek to boost their influence in INA.
There does remain scope for both companies to increase their stakes, however. MOL has indicated it is specifically targeting the 31% of INA not owned by the government. OMV, on the other hand, is reportedly interested in a 26% stake in the company, 19% of which would be the share that the Croatian government is obliged to sell to reduce its holding to 25% prior to the country's European Union accession. Still, even if direct competition between the two companies for INA shares is initially limited, the situation still appears to be shaping up as a race to control INA. The first company to strike a deal on acquiring new INA shares may well act as a deterrent for their rival to do likewise, for fear of tying up further assets in the already-complex standoff. Nevertheless, it is clear that a new front in the saga has opened, and a new point of leverage has been identified. Whether the race for control of INA serves to break open the standoff between the two central European players or whether it only serves to solidify the current limbo is still to be decided.