OMV Drops $18.4 Bln Bid for Mol on EU Concerns

By Zoe Schneeweiss and Matthias Wabl

Aug. 6 (Bloomberg) -- OMV AG, central Europe's biggest oil company, scrapped a hostile 2.8 trillion-forint ($18.4 billion) bid for Hungary's Mol Nyrt. after the European Union said the takeover would hurt competition.

In June 2007, OMV doubled its stake in Mol, Hungary's biggest oil refiner, to 20 percent and offered to buy the remainder as part of a plan to expand in Central Europe, Russia and New Zealand. Mol and the Hungarian government rejected the approach as ``hostile.''

OMV was ready to sell part of a refinery network between Bratislava and Vienna while the European Commission had been asking for ``additional remedies'' which the company couldn't accept, Chief Executive Officer Wolfgang said in an interview.

``OMV is withdrawing from its bid for Mol as they have hit a legal wall,'' said Alfred Reisenberger, an analyst with Cheuvreux in Vienna. ``It is good news as they can put their cash now to a more productive use.''

The OMV offer would have given the Vienna-based company access to refineries in Slovakia, Hungary and Croatia and a pipeline network that could link gas shipments from Russia to the Balkans. Ruttenstorfer said in the interview with Bloomberg television that OMV has no plans to sell its 20 percent stake in Mol in the ``foreseeable'' future.

OMV jumped as much as 7 percent in Vienna to 45.30 euros, the steepest one-day gain since Jan. 24. The stock traded at 44.98 euros as of 9:30 a.m. local time. Mol slipped 1 percent to 19,200 forint in Budapest.

Refining Capacity

The combined company would have had a refining capacity of 43.2 million tons a year, 1.6 trillion barrels of oil equivalent in crude reserves and 427,000 barrels of oil equivalent of production, based on data from last year. The retail network would have had at least 3,500 filling stations.

OMV estimated annual savings of 400 million euros ($620.2 million) a year for the merger. Mol estimated that a merger would cost it as much as $250 million in operating profit a year.

Mol rejected the offer and started buying back its stock to fend off the approach. The Hungarian company has spent more than 500 billion forint on the buybacks.

``It was a bit foolish to start this game at all if there are significant competition concerns,'' Peter Tordai, an analyst with KBC Securities in Budapest, said by telephone. Tordai said OMV may consider selling its stake to a competitor such as OAO Gazprom or OAO Lukoil.

Impede Offer

The Budapest-based refiner also brought in several new shareholders, in part to impede the OMV bid. Oman Oil Co. S.A.O.C. bought 8 percent of the company and Czech power company CEZ AS now holds 7 percent of Mol. BNP Paribas SA and OTP Bank Nyrt. are among banks that have borrowed Mol treasury shares.

Mol spokesman Gyorgy Bacsur declined to comment on whether Mol wanted to buy OMV's stake.

In a separate statement, OMV said second-quarter profit gained 66 percent on higher prices for its oil and natural gas. Net income rose to 684 million euros, or 2.29 euros a share, from 411 million euros, or 1.38 euros, a year earlier, beating the 568 million-euro estimate of eight analysts surveyed by Bloomberg News. Earnings before interest and tax advanced 63 percent to 951 million euros.

OMV confirmed it expects ``robust'' full-year earnings in the statement.

To contact the reporter on this story: Zoe Schneeweiss in Vienna at zschneeweiss@bloomberg.net