Global Insight Perspective | |
Significance | MOL has agreed to sell 8% of its share capital to OOC and will also acquire from the company as-yet-unconfirmed international assets and cash. |
Implications | The move furthers MOL's efforts to defend against the hostile takeover approach from OMV, with MOL and its allies already thought to control around 44% of company stock. |
Outlook | While details remain sketchy and several elements of the deal appear to remain undecided, the agreement could also boost MOL's involvement in Middle Eastern and Central Asian energy markets. |
A New Allegiance Forged
Hungarian oil and gas group MOL today unveiled a further move to solidify its defences against a hostile takeover approach from Austrian peer OMV, announcing a strategic co-operation agreement with OOC, a commercial company fully owned by the government of the Sultanate of Oman. Exact terms of the agreement remain unclear, but MOL was quick to point out that the deal will see OOC acquire 8,774,040 of MOL's category A shares, equivalent to 8% of its registered share capital. OOC will pay US$145.43 per share under the agreement, which will also see MOL take over "certain international assets and cash" from OOC. MOL said the final portfolio of cash and assets to be transferred remains subject to change depending on the take-up of pre-emption rights by third parties in relation to particular assets. The asset transactions will close no later than 31 December 2008. In addition, the two parties have agreed jointly to pursue new business development opportunities, although again specific opportunities were not stated.
Speaking on the new agreement, MOL chief executive Zsolt Hernadi emphasised the new opportunities that the deal would provide, stating: "this strategic co-operation will provide MOL with significant growth potential in upstream and downstream businesses in the Middle East, Central Asia, and other regions." Indeed, the deal looks likely to boost MOL's direct participation in the Middle East, adding to its existing exploration activities in Yemen. Omani Minister of Commerce and Industry Maqbool Ali Sultan similarly highlighted the expansion opportunities the new deal would bring, stating it was "in line with the company's strategy to grow and diversify its investment portfolio by leveraging on some of its existing assets and at the same time have a significant presence in the Central and Eastern European region."
Another Brick in the Wall
However, there is little doubt that for MOL a key driver of the agreement will have been the share sale, which will tie in a further ally in the group's shareholding structure, adding to its efforts to defend against the OMV takeover approach. In fact, the deal closely resembles an earlier agreement with Czech power group CEZ struck last year, which also saw MOL offer up shares as part of a broader strategic alliance agreement (see Czech Republic: 31 August 2007: CEZ, MOL to Form Strategic Alliance). Such a model has clearly been viewed as a success by MOL and the company is now looking to repeat it.
Indeed, the deal with OOC could well pave the way for MOL's securing of de facto control over a majority of its own stock—a clear ambition of the company since OMV first announced its takeover approach in June last year (Hungary: 25 June 2007:OMV Ups Stake in MOL, Seeks Bilateral Alliance). Since that time, MOL has set about repurchasing its own shares and striking share lending agreements with loyal parties to overcome the 10% voting threshold that currently applies to MOL shareholders. Such deals have seen MOL, along with its allies, acquire control of around 44% of its stock. Assuming MOL would replace any shares sold to OOC with new share repurchases, it may only be a matter of time before MOL directly and indirectly holds control over a majority of its own shares.
Outlook and Implications
With MOL and its allies therefore shaping up to hold over 50% of the company's stock, what chances remain for OMV's takeover efforts? As things stand, the Austrian group's hopes may now rest with its legal challenge against MOL's shareholding structure (see Hungary: 4 December 2007:OMV Starts Litigation Against MOL Challenging Block to Takeover Plans). A positive legal ruling for the company could see MOL's series of share lending agreements unwound and the Hungarian government's “golden shareholding” eliminated, providing OMV with a genuine opportunity to take control of the group. However, such a development would also be dependent on final approval of the deal by the European Commission and the revocation of Hungary's lex-MOL legislation, which the government passed as a direct response to OMV's initial approach (see Hungary: 7 March 2008:EC Launches Probe into OMV Move for MOL and Hungary: 14 November 2007: EU Issues Formal Notice Over Lex-MOL Law; Hungary Ready to Fight). While OMV maintains a good chance of securing victories in each of these cases, the process of reaching decisions will surely be lengthy and opportunities for appeals and delaying tactics abound. With MOL continuing to build its control over its future with each passing week, OMV's prospects for achieving a quick and favourable resolution to the saga are rapidly diminishing.