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OMV steps up pursuit of MOL

Deals

The two largest Central European energy companies are headed for a clash after the chief executive of one, OMV of Austria, said last Thursday that he was determined to merge with the other, MOL of Hungary, which was taking extraordinary moves to defend itself.

OMV AG chief, Wolfgang Ruttenstorfer, said that a merger with MOL Nyrt was crucial in order to compete in Europe and globally. "What we want to do is to sit at the table with MOL management, discuss how to resolve the issue, create a win-win situation and find a way how to merge the two companies," Ruttenstorfer said during an interview.

OMV began what MOL considered a hostile takeover attempt two months ago after doubling its stake in MOL to 18.6%. The Hungarian company immediately rejected the overture, as did Budapest, and has been buying back its own shares in an attempt to fend off OMV.

Analysts estimate that OMV now owns about 40% of its own shares. Ruttenstorfer, at a press conference Thursday after announcing its quarterly results, said that was planning to increase OMV´s stake in MOL, but asserted that it was not a "creeping takeover" Ruttenstorfer´s reiteration of his attempt at a deal were freshly dismissed by MOL on Thursday, which said it had a bright future as an independent company. "OMV´s actions continue to be hostile and aggressive which contradicts their talk of a friendly merger," said Szabolcs Ferencz, a spokesman for MOL.

With the oil and gas industry still fragmented, Ruttenstorfer said pressure would increase on MOL to create a large Central European company. He estimated that a merger would save between at least €3 billion, or $4 billion, per year in expenses "on the supply side, on logistics and on the petrochemical and gas side." Ferencz countered that OMV´s bid was rejected "because it would destroy value."

Both companies are of similar heft. MOL, which has a market capitalization of $11.1 billion, posted a profit of $1.56 billion in 2006. OMV, with a market capitalization of €13 billion, posted a €1.65 billion profit last year. MOL reiterated that any merger between the two companies would run foul of European Union competition authorities since it would create certain monopolies.

MOL said last week that it feared that if OMV succeeded it would sell some MOL assets to the Russian state-owned Gazprom, which has long coveted the Hungarian company, to satisfy antitrust demands. Ruttenstorfer dismissed any major competition issue, saying OMV´s legal advisors believe there is little overlap. "What is clear is that there is no competition issue in exploration and production which is the core business of the oil company," he said. "There is no competition issue over gas or petrochemicals.

There might be a problem in refinery and marketing. We might be forced to sell some of the filling stations." OMV doubled its stake in MOL in June after paying more than €1 billion for the shares. Those shares had been held by Vienna Capital Markets, an Austrian consultancy with ties to Russian, Ukrainian and Polish businesses, which had bought them from Meget Rakiomkulov, a Russian mogul in Hungary and a former executive for the banking division of Gazprom. (petrolplaza)

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