Austrian oil and gas giant OMV finally threw in the towel on Wednesday in a long battle to buy Hungarian rival MOL, announcing it was withdrawing its bid in the face of EU opposition to the deal. A merger would have created one of Europe's biggest oil and gas groups, with an estimated capitalisation of 27 billion euros.
MOL, which has consistently rejected OMV's bid as hostile, welcomed the decision. OMV said in a statement it had decided to "revoke its intention to make an offer to shareholders of MOL of 32,000 Hungarian forint (136.2 euros, 211.35 dollars) per share." The decision finally closes the book on OMV's long-running battle to take over MOL and create a central European energy powerhouse. State-controlled OMV originally launched its bid to acquire privately-held MOL in September 2007.
But the bid ran into fierce opposition from both company management and the Hungarian government, which argued that the hostile take-over raised national security concerns over Hungary's energy supplies. The Hungarian parliament even passed a law, dubbed Lex MOL, aimed at protecting energy companies deemed to be of strategic importance from take-over, effectively blocking OMV's bid.
But it was the European Commission's reservations about the deal that finally put the nail in the coffin of OMV's ambitions. On June 16, Brussels had said that because OMV was already the biggest player in the oil and gas markets in central Europe, a tie-up with MOL would seriously hamper competition in the region.
In the EU Commission's daily "mergers notification list" on Wednesday, OMV's bid was confirmed as "withdrawn". But Brussels issued no further comment on the matter. For its part, MOL was jubilant at the latest development. OMV's latest decision finally recognised that the deal was "inherently value-destructive and would go against economic and strategic rationale."
The Hungarian government had decided not to make any official comment on the matter. Hungarian investors nevertheless seemed disappointed and MOL shares were showing a loss of nearly five percent at 18,475 forint (78 euros) on the Budapest Stock Exchange in early afternoon trading.
OMV said it could not agree to any of the alternative scenarios under which the EU would have allowed a tie-up to go ahead. "The European Commission has indicated that it would not accept commitments that OMV had proposed; since other commitments would be unacceptable to OMV, OMV has decided to withdraw the merger notification filed with the European Commission on January 31, 2008," the Austrian giant said.
OMV had proposed creating a refinery complex, integrating two closely located refineries, one in Austria and one in neighbouring Slovakia, with the possibility of a third party holding a capacity share. But Brussels found these proposals unacceptable. "OMV is not prepared to offer more far-reaching commitments without jeopardising the economic and strategic rationale for the transaction," the Austrian group retorted in its statement.
The EU Commission had expressed concern about the competitive implications of a tie-up between OMV and MOL, and Brussels also hit out at Hungarian attempts to block the deal, notably by way of its Lex MOL. European Commissioner for Internal Market and Services, Charlie McCreevy, had warned Budapest that the law was "incompatible" with EU rules allowing unrestricted cross-border investment in Europe.
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