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).