August 7, 2019 / 2:57 PM / 10 days ago

EU opens antitrust investigation into PKN's bid for Lotos

BRUSSELS (Reuters) - Polish oil refiner PKN Orlen’s (PKN.WA) bid for rival Lotos (LTSP.WA) may reduce competition in Poland and neighboring countries and push up prices, EU antitrust regulators said on Wednesday as they opened a full-scale investigation.

FILE PHOTO: The logo of PKN Orlen, Poland's top oil refiner, is pictured at a petrol station in Warsaw, Poland April 25, 2019. REUTERS/Kacper Pempel/File Photo

State-run PKN wants to buy at least 53% of Lotos, in which the government holds a 53.19% stake. The companies own the only two refineries in Poland and are also present in the Czech Republic, Estonia, Latvia, Lithuania and Slovakia.

The European Commission said the deal may lead to higher prices and curb competition, confirming a Reuters report on July 4.

In the wholesale supply of fuels, the combined company would be a quasi-monopoly facing limited competition from imports, the EU antitrust enforcer said.

It said in the retail market, the merged company would be four times bigger than the next rival, while airports would have only one jet fuel supplier.

The deal would also eliminate the only competitor to PKN in bitumen supply in the Czech Republic, Estonia, Latvia, Lithuania and Slovakia. The combined company would have a dominant share of the provision of mandatory storage facilities in Poland.

The regulator also expressed concerns about downstream rivals being shut out of the market, because of the volumes of fuels held by both the companies. It set a Dec. 13 deadline for its decision.

Rival BP Plc (BP.L), with 550 petrol stations in Poland versus PKN’s 1,783 and Lotos’ 493, has voiced its concerns about the deal.

PKN said it was not surprised with the regulator’s decision.

“We have to do with a complicated process ... we hope that thanks to constructive cooperation we will finalize our works this year,” PKN Chief Executive Officer Daniel Obajtek said.

PKN, which has a market capitalization of almost 40 billion zlotys, had planned to complete the Lotos takeover by the end of this year.

Reporting by Foo Yun Chee; Additional reporting by Agnieszka Barteczo in Warsaw; Editing by Francesco Guarascio, Jane Merriman and Shounak Dasgupta

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