Business | Oil & Gas
OMV drops $23b MOL bid as profit beats forecasts
Austrian oil and gas group OMV yesterday called off its controversial $23 billion attempt to buy Hungarian rival MOL, saying the European Commission demanded unacceptable concessions.
- Reuters
- Published: 00:07 August 7, 2008
Vienna: Austrian oil and gas group OMV yesterday called off its controversial $23 billion attempt to buy Hungarian rival MOL, saying the European Commission demanded unacceptable concessions.
The move ends an acrimonious year-long standoff between the two companies that had begun to irritate some investors and weighed on OMV's share price. MOL had seen OMV's overture as hostile despite OMV's vows it was seeking a friendly deal.
The European Union's executive body had raised concerns that a merger between OMV and MOL would create competition problems and could lead to higher prices, indicating that OMV might have to sell a refinery to get any deal approved.
"The European Commission has indicated that it would not accept commitments that OMV had proposed," OMV said in a statement. "Since other commitments would be unacceptable to OMV, OMV has decided to withdraw the merger notification."
"Further pursuit of proposed combination with MOL under given conditions would be against OMV's economic and strategic rationale," OMV said.
Conditional offer
In June last year, OMV announced that it upped its stake in the Hungarian rival to nearly 20 per cent. In September, the Austrian group launched a conditional offer to MOL shareholders of 32,000 forint ($211.2) per share, valuing the Hungarian firm at $23 billion at the current exchange rate.
Meanwhile MOL rejected the unsolicited approach and launched an aggressive defence through share buy backs and by parking its stock with friendly institutions.
"It was a bad strategic move to make an offer, so this should just narrow the situation," said Erste Bank analyst Jakub Zidon, who expects OMV shares to rise in the wake of the news. "From the share price development point of view, this was a price cap for the potential price development of OMV's share price."
Analysts had predicted that OMV would face a tough struggle to take over its Hungarian rival and said in the past that OMV could do better with its cash than to park it in the MOL stake.
Chief executive Wolfgang Ruttenstorfer told broadcaster CNBC that he did not intend to sell the MOL stake. MOL did not immediately comment on OMV withdrawing its offer.
For Ruttenstorfer, the failed MOL bid is the second fruitless pursuit of a major deal following OMV's attempt to combine with Austria's top utility Verbund in 2006.
OMV reported a better-than-expected 86 per cent increase in second-quarter operating earnings after one-off items yesterday, driven by high oil prices yesterday.
Earnings before interest and tax (Ebit) rose to 1.083 billion euros ($1.68 billion) after stripping out one-off items in the three months to June. Analysts had on average forecast a 59 per cent rise to 928 million euros.
Markets: Big uncertainty
OMV's stock has fallen nearly 24 per cent since the start of the year, roughly in line with the Austrian blue-chip index ATX. Analysts have cited the standoff with MOL as the biggest uncertainty around the stock.
MOL shares fell 1.2 per cent to 19,160 forints by 0727 GMT while OMV shares rose 6.4 per cent to 45.03 euros.
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