OMV revokes plans to merge with MOL

Austrian-based energy giant OMV has revokes its intention published last September to make an offer to shareholders of Hungary’s MOL after the European Commission indicated that it would not accept commitments that OMV had proposed.
Further pursuit of a proposed combination with MOL under given conditions would
be against OMV’s economic and strategic rationale, the company said, adding that it would continue its growth strategy in Central Europe.
"In addition to the sale of retail stations in various countries, OMV had proposed a ‘shared-refinery’/cost center model to address the Commission’s principal concerns regarding the concentration of refining capacity across the region," said Gerhard Roiss, OMV’s Deputy Chairman and responsible for Refining and Marketing.
"OMV proposed the creation of a refinery centre, in which an independent third party could have held a capacity share with a share in corporate governance equal to OMV." The proposal included the integration of the Schwechat and Slovnaft refineries, which are only 55 km apart from each other, creating one refinery complex. Such a commitment would have allowed the independent buyer access to significant refining capacity and products, crude transport facilities, storage infrastructure, the ability to sell product at highly competitive terms and, therefore, to become a strong competitor throughout the region. OMV already shares refining capacity along with BP, ENI and Ruhroil at the Bayernoil refinery network.
"The EU has stated the need for a common European energy policy and to support a policy of creating stronger European energy companies to ensure the security of supply for the region – fundamental objectives for our proposed combination with MOL," said Wolfgang Ruttenstorfer, Chief Executive of OMV.
"We strongly believe in our original rationale for a strategic alliance with MOL. The combination of both companies would have significantly enhanced the security of energy supply throughout the region through both greater diversification of crude oil supply, as well as the greater scale in upstream to generate additional growth of the combined resource base," added Ruttenstorfer.
An immediate benefit of the combination with MOL would have been the creation of a more efficient downstream business. OMV believes that increased efficiency, together with optimizations both at corporate level and in the upstream, gas and petrochemical divisions, would have helped the combined group to deliver total pre-tax synergies of approximately EUR 400 mln a year.
OMV is now considering various options to maximize the value of its 20.2% stake in MOL and to benefit from value creation in the consolidation process. As an active shareholder in MOL, it will continue to seek ways that ensure the best principles of corporate governance are applied.
OMV’s business remains firmly on track to deliver the targets that have been set up to 2010. In addition, OMV’s diversified geographic portfolio of upstream assets continues to provide OMV with real strength, with new developments in New Zealand, Kazakhstan, Austria and Yemen in the second half 2008.