UPDATE 5-Surgut to buy 21 pct of MOL from OMV; irks MOL

Mon Mar 30, 2009 6:24pm BST

Quotes

   

* Paying 1.4 bln euros; 19,212 forints per share

* Possible move to gain control seen; MOL likely to resist

* Stake sale eases fears OMV could cut dividend further

* MOL shares up 11.6 pct, OMV shares up 2.8 pct

* MOL says to pursue independent strategy

(Adds Hungarian government reaction)

By Melissa Akin

MOSCOW, March 30 (Reuters) - Secretive oil producer Surgutneftegaz (SNGS.MM) is to buy 21 percent of Hungarian peer MOL (MOLB.BU), continuing a Kremlin-backed trend of Russian companies investing in European energy assets but drawing a sceptical response from MOL.

Austrian energy firm OMV (OMVV.VI) said on Monday it would sell the stake for 1.4 billion euros ($1.9 billion) in a deal worth 19,212 forints per MOL share, a 93 percent premium to Friday's close.

Crude production-focused and cash-rich Surgut, said the stake in refining and marketing-focused MOL would advance its strategy of being vertically integrated.

"The purchase of a stake in MOL is a serious basis for the start of long-term, mutually beneficial co-operation between our companies," Surgut Chief Executive Vladimir Bogdanov said in a statement.

Investors and analysts said the high price suggested Surgut hoped to gain control of MOL.

MOL, which last year repelled a takeover approach from OMV, said it had not been consulted on the move and that it planned to pursue an independent strategy.

"There have not been, nor are there, any strategic or operational relationships between Surgutneftegas and MOL. Therefore, the intentions of Surgutneftegas, formulated in its statement, are not clear," MOL said in a statement.

BID DEFENCES

MOL has a number of defences against a hostile bid, including a voting cap and a Hungarian law, dubbed 'Lex-Mol', which was criticised by the European Union when passed in 2007.

However, a company seen as loyal to the Kremlin is considered a tougher opponent than OMV and one which is unlikely to rely on EU legal challenges to secure its aim.

"The next time the Hungarians meet with Medvedev or Putin, this will be a political issue, not a legal or a capital markets matter," one hedge fund manager said. "The wolf is in the pen now."

Late on Monday the Hungarian government issued a statement saying MOL retaining its independence was in Hungary's interests.

"The stance of the government has not changed in comparison to its stance in a previous, similar situation: it does not support anyone trying to gain influence in strategic Hungarian industries with a hostile intent," it said.

MOL shares were closed up 1.8 percent at 10,120 forints after rising 11.6 percent earlier in the day, compared to a 4.2 percent drop in the European oil and gas sector index .SXEP.

OMV shares rose a third to 25.10 euros, with cash from the deal easing fears about its ability to maintain both its already reduced dividend and its heavy investment programme, after crude prices fell around $100 per barrel since July.

Surgut shares rose over 3 percent after the announcement but fell back after MOL's statement to close down 0.09 percent at 21.50 roubles.

In recent years, Russian oil producers have eyed European refining assets to process their crude.

Non-state controlled Russian oil producer LUKOIL (LKOH.MM), which has refining assets in Romania and Bulgaria, bought into Italian oil refiner ERG (ERG.MI) last year and held talks to buy a large stake in Spainish oil company Repsol (REP.MC).

Similarly, state-controlled gas producer Gazprom (GAZP.MM) has also sought to buy European gas assets, like those MOL owns, so it can control the supply chain from the well-head to users.

The moves have aroused suspicion among European politicians and citizens.

Valery Nesterov, an oil and gas analyst at Troika Dialog brokerage, said it was likely the Kremlin recommended Surgut, being the only Russian oil company with free cash, to buy the stake.

"Russia has long eyed Hungary as part of its strategy to access end users and increase its influence on East European markets," he said.

GAS CUTS

Surgut's acquisition of a stake in MOL, whose interests are concentrated in Hungary, Slovakia and Croatia, expands Russian influence in consumer countries hard hit by gas cuts in Russia's winter row with Ukraine over pricing.

Amid calls for Europe to diversify its gas supply away from Russia, which supplies a quarter of Europe's gas and will ship up to 33 percent by 2020, Russia this month won support from Hungary for a new gas pipeline, South Stream, that would bypass Ukraine. [ID:nLA936604]

MOL, Hungary's biggest company by market capitalisation, is cooperating with South Stream and is also a partner in a rival pipeline, Nabucco.

The sale caught markets by surprise in that Surgut had not previously shown any foreign ambitions, and OMV's CEO said last week he did not plan to sell the stake this year [nLN220473].

Surgut, which has long denied market rumours its management owns the company, has a cash pile thought to stand at $19 billion at end-September [ID:nLE737369].

OMV is selling its stake for approximately the same price it paid for the shares, a spokesman said. Half the stake was bought several years ago at a much lower price than it plans to sell.

The other half of the stake was purchased in 2007 as OMV launched its takeover bid for MOL, and the Vienna-based company will take a loss on these shares.

This is the second failed merger launched by the company in recent years after a planned tie-up with Austrian utility Verbund (VERB.VI) fell through in 2006.

MOL operates a large modern refinery in Hungary, the 165,000 barrels-per-day Szazhalombatta plant, as well as a 60,000 barrels-per-day plant at Bratislava in Slovakia.

OMV said it was advised by J.P. Morgan. ($1 = 0.7560 euro) ($1 = 226.14 forints) (Writing by Tom Bergin in London; reporting by Christian Goetz in Berlin, Melissa Akin, Dmitry Zhdannikov and Tanya Mosolova in Moscow, Tom Bergin in London and Balazs Koranyi in Budapest; Editing by Dan Lalor and Simon Jessop)

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