However, analysts said MOL could buy only a fraction with its current bid and then seek to gain majority control in direct share-swap talks with the Zagreb government. This would probably give it the coveted prize in its battle for regional supremacy with Austrian OMV.

MOL already owns 25% of INA, Croatia’s dominant fuel retailer, and has offered 2,800 kuna ($569.1) per share, or €1.2 billion ($1.74 billion), for the 31% not held by MOL or the Croatian government.

Most of this free float is held by small private Croat investors, INA employees and veterans of the 1991-95 war of independence, many of whom are likely to hold on to their stock.

“We do not think MOL could purchase a noteworthy part of the free float at this price level,” Raiffesenbank said in a research note on Tuesday.

The government owns 44%. A share swap would involve 19% of INA so MOL would need to buy at least six percent in the bid, but even that could not be taken for granted.

“If our shares were offered on the bourse, they would reach 20% to 30% higher price. It is too early to say what the fund will do,” Djuro Decak of a war veterans fund that controls seven percent of INA told the Vecernji List daily.

Croatia‘s institutional investors, who met in Zagreb on Tuesday, said the price did not reflect “the expected effects of the gas market liberalization and the modernization of (INA’s) refineries,” state radio said.

But a Croat source familiar with INA’s sell-off process said MOL would probably not be too disappointed with poor response.

“MOL has no reason to pay more than necessary as they can acquire additional INA stock in direct talks with the government,” said the source, who asked not to be named.

INA shares traded 0.18% up at 2,795.03 kuna on the Zagreb bourse on Tuesday.

They reached a year high of 3,199 kuna in mid-July, when the market hoped that OMV, which had just given up its long-standing efforts to buy MOL, would enter the race for INA.

OMV said later it would not launch a counterbid, but would only take part if the government called a tender for its stock, which now seems unlikely.

The government will not seek a new strategic partner for INA because the law obliges it to swap or sell its shares to the existing partner or list them on the bourse, the source said.

“A five year lock-up period for MOL to dispose of INA shares freely expires in October. The government is very much interested in what will happen with INA stock and that’s why the (swap) talks with MOL are on the agenda,” the source said. (Reuters)