OMV waits in wings as pressure rises on Dogan

VIENNA (Reuters) - A tussle between Turkey and Dogan Holding (DOHOL.IS) could strengthen the hand of Austrian energy group OMV (OMVV.VI) which wants to take control of gas station chain Petrol Ofisi (PTOFS.IS) from the embattled group.

Turkey imposed a record $2.5 billion fine on Dogan's media group Dogan Yayin (DYHOL.IS) this week over unpaid taxes.

Although the row does not affect Petrol Ofisi directly, analysts say the added pressure on its owner Dogan could spur a faster sale to raise cash for the fine, strengthening the Austrian group's bargaining power in talks.

OMV, which already owns 42 percent of Petrol Ofisi, said last month it wanted to build up Turkey as its third strategic center, after Austria and Romania, because it can act as a bridge between Europe and oil and gas-producing countries.

"If Dogan is penalized by the government and this tax penalty is completely valid, then that can speed up the sale," said ING analyst Tamas Pletser in Budapest.

But Dogan Group was unlikely to give up without a fight on the tax issue, he said. Dogan Yayin, Turkey's biggest media company, has said the government is treating it unfairly because of critical political coverage.

OMV started to pursue Dogan's $1.2 billion stake in Petrol Ofisi after selling its stake in Hungarian group MOL MOLB.BU for $2 billion following a takeover attempt that went awry.

On top of the MOL cash, it has raised 2.4 billion euros ($3.5 billion) in bond auctions to fund acquisitions. It also got shareholder permission to issue up to 78 million new shares, worth 2.2 billion euros at current prices.

To keep its gearing -- now at 28 percent -- below its 30 percent goal, OMV could sell new shares to fund the acquisition, and there have been reports it is preparing to raise 800 million euros that way.

"Were the company to become acquisitive it would appear to be undercapitalized to pursue that strategy," UBS analyst Alex Brooks in London said.

OMV has declined to comment on whether it is preparing a rights issue. It said it would look into funding a Petrol Ofisi deal if and when it was finalized.

A GOOD DEAL?

Some analysts think OMV is more likely to use money it already has to fund a Petrol Ofisi deal because it could be difficult to convince investors that buying downstream assets is a good idea. Some say the deal may be too highly priced.

On the whole, analysts see downside to the Petrol Ofisi deal. "It's not a great time for OMV to be entering this market because it's difficult to find financing," said Selim Kunter, analyst at Ekspres Invest in Istanbul.

Some analysts said investors might be unnerved by the speed at which OMV has gone after Petrol Ofisi after having its fingers burned with MOL.

OMV had a rough second quarter, with adjusted core earnings falling 83 percent as a steep drop in margins pushed its downstream operations into the red.

But the company has remained determined to expand into fast-growing markets, as the Petrol Ofisi talks have shown.

OMV acquired Romanian Petrom SNPP.BX in 2004 but was badly hit by the botched MOL takeover and has had difficulty in its home market where it tried and failed to acquire utility Verbund

(VERB.VI).

"Whether there's a tax fine or not, we expect the Petrol Ofisi sale to happen before too long," Ata Invest analyst Onder Zorba in Istanbul said.

"I expect that there's been progress since the talks were announced. (But) it's not as though there's a sense of 'We've been fined, let's finish this right away'."

(Additional reporting by Ayla Yackley and Birsen Altayli in Istanbul; Editing by Dan Lalor)

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