The Budapest Stock Exchange index, BUX, moved marginally up last week on average volume. The BUX closed on Monday 15 of October at 28,307 points. Meanwhile the Dow Jones Industrial average in the US closed last week at a historical high of 14,164. Mol, the largest Hungarian oil and gas company, traded for the past week above HUF 27,000 and slightly above HUF 28,000. OTP had uneventful trading between the levels of HUF 9,400 and HUF 9,500.
The Financial Times reported that Mol hired Goldman Sachs to advise on its defense against a bid from Austrian rival OMV.
Goldman will join giants UBS and Morgan Stanley in advising Mol, the newspaper said. The European Commission has threatened to take action against Hungary for approving the Lex Mol law, which gives the government power to veto a bid for Mol. JPMorgan Chase & Co. and Deutsche Bank AG are advising OMV, the newspaper said. The final outcome between the battle of Austrian OMV and Hungarian MOL is uncertain, and could last many more months, as well as whether the European Union will actively pursue a change in the new “Lex-Mol.” The outcome is very much unclear so I predict MOL shares will trade around the current levels.
For this week there was news for Richter, the largest pharmaceutical.
Richter announced on Monday Oct 15 that it acquired a 95.78% stake in Pharmafarm, the Romanian retail and wholesale group for EUR13m. The group operates 14 pharmacy units in 3 Romanian counties representing 2.5 percent market share at retail and 7 percent at wholesales business in Romania. Completion of the transaction remains subject to the approval of the Romanian Competition Authority.
Forest Lab and Richter said high doses of its experimental antipsychotic drug did not show statistically significant improvement in a mid-stage trial for the treatment of schizophrenia. However, low doses reached a significant effect. The companies are to continue developing the drug. This is negative news for the shares, however, it is hard to quantify the effect. I expect there will be some negative impact in the trading, especially if there will be a sell-off in the global markets.
Thursday, 25 October 2007
Wednesday, 10 October 2007
Lex MOL bill passed
The Parliament approved "lex MOL" on Monday October 8. The law will come into force sometime next week. This law prevents foreign state-owned companies from taking over strategic Hungarian firms. The Lex MOL law is one of the strictest regulations in Europe, which could generously decrease the interest for Hungarian equities from international strategic investors. State-owned Austrian energy firm OMV's attempt to launch a hostile takeover of its Hungarian peer sparked the drive for the new legislation.
I believe that the Budapest Stock Exchange will under perform other regional markets as MOL, the largest oil and gas company will stay under selling pressure. This new law could also affect somewhat stocks like Richter (pharmateutical) and Magyar Telekom (subsidiary of Deutsche Telekom) as investors realize that those companies will not be subject to any hostile take-over attempt, reducing in that way its attractiveness as shareholders will not be compensated when selling their stake to a potential buyer. Analysts predict that in the case of the largest retail bank, OTP, it will not affect as much as already a hostile takeover for the bank was nearly impossible since its management has a strong control over the company already.
Furthermore, the Hungarian market has been underperforming in the past period, which could be related to preparing to "lex MOL.”
If the European Commission takes steps against the law, it could take years until any official decision is made by the European Court.
Last week, Internal Market Commissioner Charlie McCreevy wrote to Hungarian Economy Minister Janos Koka warning that he would push through a case against Hungary in the European Court of Justice if “Lex-MOL” was passed.
Koka, however, insisted the new law did not break European Union rules.
``It's not about protection against foreign investors,'' he told the Financial Times. ``It's about protection against illegal hostile demands.''
Vienna based OMV has for months pushed MOL to sit down at the negotiating table and last week offered 32,000 Hungarian forints per share, thus valuing the company at around 20 billion dollars. OMV asked MOL to unwind the shareholding structures that have given the management control of about 40 per cent of equity and to lift the 10 per cent voting limit on shareholdings. MOL’s management rejected the bid and conditions from OMV. Changing the rules would require 75 per cent of votes at an extraordinary general meeting, but the MOL board is now thought to have gained a voting influence of over 40 per cent by lending shares to banks with close links to the energy firm's management.
Several of MOL's independent shareholders (London based Centaurus Capital hedge fund and Templeton Asset Management) have come out in favor of talks with OMV, but so far MOL’s board has refused to change their ideas with respect to any possible synergy with its Austrian rival.
I believe that the Budapest Stock Exchange will under perform other regional markets as MOL, the largest oil and gas company will stay under selling pressure. This new law could also affect somewhat stocks like Richter (pharmateutical) and Magyar Telekom (subsidiary of Deutsche Telekom) as investors realize that those companies will not be subject to any hostile take-over attempt, reducing in that way its attractiveness as shareholders will not be compensated when selling their stake to a potential buyer. Analysts predict that in the case of the largest retail bank, OTP, it will not affect as much as already a hostile takeover for the bank was nearly impossible since its management has a strong control over the company already.
Furthermore, the Hungarian market has been underperforming in the past period, which could be related to preparing to "lex MOL.”
If the European Commission takes steps against the law, it could take years until any official decision is made by the European Court.
Last week, Internal Market Commissioner Charlie McCreevy wrote to Hungarian Economy Minister Janos Koka warning that he would push through a case against Hungary in the European Court of Justice if “Lex-MOL” was passed.
Koka, however, insisted the new law did not break European Union rules.
``It's not about protection against foreign investors,'' he told the Financial Times. ``It's about protection against illegal hostile demands.''
Vienna based OMV has for months pushed MOL to sit down at the negotiating table and last week offered 32,000 Hungarian forints per share, thus valuing the company at around 20 billion dollars. OMV asked MOL to unwind the shareholding structures that have given the management control of about 40 per cent of equity and to lift the 10 per cent voting limit on shareholdings. MOL’s management rejected the bid and conditions from OMV. Changing the rules would require 75 per cent of votes at an extraordinary general meeting, but the MOL board is now thought to have gained a voting influence of over 40 per cent by lending shares to banks with close links to the energy firm's management.
Several of MOL's independent shareholders (London based Centaurus Capital hedge fund and Templeton Asset Management) have come out in favor of talks with OMV, but so far MOL’s board has refused to change their ideas with respect to any possible synergy with its Austrian rival.
Wednesday, 3 October 2007
OMV bids for MOL
Vienna based oil company OMV AG finally made a hostile bid for MOL NyRt last Tuesday (Sep 25) offering Ft32,000 per share (a deal worth Ft2.8 trillion or $15.7bn) while the stock was trading around the Ft27,000 level. OMV asked MOL to unwind the shareholding structures that have given the management control of about 40% of equity, and to lift the 10% voting limit on shareholdings. MOL's management rejected the bid and conditions from OMV.
Centaurus Capital, a London-based hedge fund which holds 1% stake in MOL, strongly criticized the company's tactics in attempting to defend against the bid from its Austrian competitor.
Other significant prominent investors of Mol, the region's largest refiner, such as Templeton Asset Management, have also criticized it for its attitude towards the hostile bid.
Martin Bartenstein, Austria's economic minister, suggested that Hungary should consider taking a blocking minority stake of just over 25% in Mol.
"That way, the Hungarian government could ensure OMV was not taking over MOL, but rather that this was a deal between equals," he said.
However, Hungary's purchase of a minority stake to fight a hostile takeover would be the "wrong solution," economy minister János Kóka said.
Hungary is not interested in creating a regional oil and gas monopoly, and wants to keep Mol in private ownership, which makes it a more effective and faster-growing company than state-controlled OMV, Kóka claimed.
As stated by Bloomberg news, analysts predict that the Hungarian company and the government will impede any kind of a hostile takeover.
"This takeover is unlikely to go through without Mol management's approval," Goldman Sachs' analysts wrote this week.
"We view it as likely to open up a long period of negotiations between OMV, Mol and the Hungarian government, including legal battles."
OMV's management will speak with investors in several European cities this week to detail their takeover plans.
"The Hungarian Parliament will probably accept the so called "Lex-Mol" law that would prevent any kind of hostile bid or takeover of any national strategic company.
If this law is finally passed next week, the Budapest Stock Exchange might experience some selling pressure, as the attractiveness of its main stocks like OTP (the largest bank) and Richter Gedeon NyRt (pharmaceuticals) will decrease, since a foreign company will be less likely to take it over.
The chances of Mol shareholders abolishing the voting limit and canceling the company's own shares are slim, so there is a very low probability of OMV's public bid succeeding.
In my opinion, "Lex-MOL" does not make too much of a difference in the battle between MOL and OMV.
OMV expects the European Union to investigate whether the new law, allowing Hungary to veto the merger, complies with Union competition rules.
The EU is "monitoring the situation very closely," Oliver Drewes, a European Commission spokesman confirmed yesterday (Monday, Oct 1).
Centaurus Capital, a London-based hedge fund which holds 1% stake in MOL, strongly criticized the company's tactics in attempting to defend against the bid from its Austrian competitor.
Other significant prominent investors of Mol, the region's largest refiner, such as Templeton Asset Management, have also criticized it for its attitude towards the hostile bid.
Martin Bartenstein, Austria's economic minister, suggested that Hungary should consider taking a blocking minority stake of just over 25% in Mol.
"That way, the Hungarian government could ensure OMV was not taking over MOL, but rather that this was a deal between equals," he said.
However, Hungary's purchase of a minority stake to fight a hostile takeover would be the "wrong solution," economy minister János Kóka said.
Hungary is not interested in creating a regional oil and gas monopoly, and wants to keep Mol in private ownership, which makes it a more effective and faster-growing company than state-controlled OMV, Kóka claimed.
As stated by Bloomberg news, analysts predict that the Hungarian company and the government will impede any kind of a hostile takeover.
"This takeover is unlikely to go through without Mol management's approval," Goldman Sachs' analysts wrote this week.
"We view it as likely to open up a long period of negotiations between OMV, Mol and the Hungarian government, including legal battles."
OMV's management will speak with investors in several European cities this week to detail their takeover plans.
"The Hungarian Parliament will probably accept the so called "Lex-Mol" law that would prevent any kind of hostile bid or takeover of any national strategic company.
If this law is finally passed next week, the Budapest Stock Exchange might experience some selling pressure, as the attractiveness of its main stocks like OTP (the largest bank) and Richter Gedeon NyRt (pharmaceuticals) will decrease, since a foreign company will be less likely to take it over.
The chances of Mol shareholders abolishing the voting limit and canceling the company's own shares are slim, so there is a very low probability of OMV's public bid succeeding.
In my opinion, "Lex-MOL" does not make too much of a difference in the battle between MOL and OMV.
OMV expects the European Union to investigate whether the new law, allowing Hungary to veto the merger, complies with Union competition rules.
The EU is "monitoring the situation very closely," Oliver Drewes, a European Commission spokesman confirmed yesterday (Monday, Oct 1).
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