Croatia/Hungary: Mol seeks greater control at home and abroad

COPYING AND DISTRIBUTING ARE PROHIBITED WITHOUT PERMISSION OF THE PUBLISHER: SContreras@Euromoney.com

By:
Guy Norton
Published on:

Negotiations on government purchase of Surgutneftegaz stake; Surprise offer to buy out minority shareholders at INA

Mol, Hungary’s leading oil and gas company, is looking to resolve ownership issues at home and abroad. On the domestic front Mol is seeking to come to terms with Russian oil company Surgutneftegaz, which holds a 21.2% stake in the firm that it acquired for $2 billion in March 2009 from Austria’s OMV after OMV failed in its attempt to acquire Mol in a hostile takeover. The stake is now worth about $2.3 billion. For its part Mol has always regarded Surgutneftegaz’s holding in a negative light and believed that the Russian oil company would seek to wrest control with the backing of the Russian government.

Mol has succeeded in persuading the Hungarian government to initiate talks on acquiring the Russian company’s stake on the basis that Mol, the country’s largest refiner, is a national strategic asset that should not fall into foreign hands. In late December, however, Hungarian development minister Tamas Fellegi told local media that negotiations between Hungarian and Russian officials were proving tricky. "The Russians are defending their positions hard, but in a correct manner", said Fellegi, adding: "We are also defending out national interests in a hard and correct manner."

Croatian intrigue

Mol is also seeking to extend its control over Croatian oil and gas company Industrija Nafte (INA), announcing a surprise bid in early December for an 8% stake held by minority shareholders. Mol offered K2,800 ($504.30) a share, a 56% premium to outstandings. Mol says it is looking to gain majority control to strengthen its commitment to INA and would not seek to diminish the Croatian government’s influence in strategic decision-making in the company. It previously held 47.16% of INA’s shares, with the Croatian government controlling 44.84%.

Although Croatian economy minister Djuro Popijac acknowledged that Mol was within its rights to launch its offer, he regretted that the company had neglected to inform the Croatian government of its plans and in response has encouraged Croatian pension funds to buy up outstanding stock to prevent Mol from gaining an absolute majority of shares in INA.

Frenzied buying of INA shares in mid-December after an 11-day trading ban ordered by Hanfa, the Croatian financial services supervisory agency, pushed the stock price up more than 60% to K2,830 and prompted Mol to complain that the share purchases were "an untransparent, unfair, unclear and hostile action". Hanfa, however has denied claims of manipulation.

Commenting on Mol’s bid, which is valid until January 14, Gergely Varkonyi, an oil and gas analyst at Deutsche Bank in Budapest, notes: "The announcement is a positive surprise, in case Mol crosses the 50% threshold, that would make its controlling position unquestionable."