OMV pulls MOL bid offer, says EU too strict
VIENNA (Reuters) - Austrian oil and gas group OMV (OMVV.VI) on Wednesday called off its unsolicited $23 billion bid offer for Hungarian rival MOL MOLB.BU, saying European Union restrictions were too tough to make the deal worthwhile.
The move ends an acrimonious year-long standoff between the companies that had begun to irritate some investors and weighed on OMV's share price. The stock rose nearly 8 percent to a three-week high of 45.60 euros on relief a deal was off.
"It was a bad strategic move to make an offer, so this should just narrow the situation," said Erste Bank analyst Jakub Zidon, "This was a cap for the potential development of OMV's share price."
The European Commission, the EU's executive body, raised concerns that an OMV-MOL merger would reduce competition and could lead to higher prices, indicating that OMV might have to sell a refinery to get any deal approved. <ID:nL10486424>
OMV said it had offered to open the refineries to competitors to allay the Commission's concerns, but that this offer was not enough for the regulator.
"The European Commission has indicated that it would not accept commitments that OMV had proposed," OMV said in a statement. "Since other commitments would be unacceptable to OMV, OMV has decided to withdraw the merger notification."
Chief Executive Wolfgang Ruttenstorfer told reporters that OMV would keep its 20.2-percent stake in MOL for the time being. He said he expected consolidation in the region to continue but that he could not say yet what exactly this would mean for OMV.
MOL dropped as much as 5 percent to 18,470 forints. The company had no immediate comment.
OMV last June surprised markets and shocked MOL by revealing it raised its stake in the Hungarian rival and proposed a tie-up. It followed up with a conditional 32,000 forint ($211.2) offer per MOL share, or $23 billion for the entire company.
MOL immediately dismissed OMV's overture as hostile despite OMV's vows it was seeking a friendly deal. It launched an aggressive defense through share buybacks and by parking its stock with friendly institutions.
Analysts predicted OMV would face a tough struggle to win over MOL and could do better with its cash.
A key OMV supporter, high-profile emerging markets investor Mark Mobius of Templeton Asset Management last month said in an interview he was having second thoughts about the deal's merits.
By Tuesday's close, OMV's stock had fallen nearly 24 percent this year, underperforming a 19-percent drop of the DJ Stoxx Oil & Gas index .SXEP.
For Ruttenstorfer, the failed MOL bid is the second fruitless pursuit of a major deal following OMV's attempt to combine with Austria's top utility Verbund (VERB.VI) in 2006.
But Citigroup analyst James Neale praised his cancellation of the deal. "We argue that this shows decisive management, consigning the 20-percent stake-build to opportunism rather than empire building," he said in a note to clients.
OMV separately reported a better-than-expected 86 percent increase in second-quarter operating earnings after one-off items on Wednesday, driven by high oil prices on Wednesday.
Earnings before interest and tax (EBIT) rose to 1.083 billion euros ($1.68 billion) after stripping out one-off items in the three months to June. Analysts had on average forecast a 59 percent rise to 928 million euros.
(Additional reporting by Boris Groendahl)
(Editing by Louise Ireland)
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