October 8, 2007 / 4:38 PM / 13 years ago

UPDATE 1-Hungary okays "Lex-MOL" despite EU criticism

(Adds detail, EU comment)

By Gergely Szakacs and Sandor Peto

BUDAPEST, Oct 8 (Reuters) - Hungary’s parliament on Monday approved a law which many investors say is designed to protect oil company MOL (MOLB.BU) from being taken over by Austria’s OMV (OMVV.VI) and which has been criticised by the European Union.

Media reports have dubbed the law “Lex-MOL” as it was drafted after an offer by OMV for MOL, Hungary’s biggest company by sales, in a deal which could value MOL at $20 billion.

MOL and the Hungarian government argue that merging the two companies would form a regional monopoly and that as the Austrian oil company is part-owned by the state, it would effectively be the re-nationalisation of a private company.

The law, which has been extended beyond the energy sector, was passed by 337 votes to four and now needs only the approval of Hungary’s president which is a formality.

European Union Internal Market Commissioner Charlie McCreevy wrote to the Hungarian government threatening to extend action against the country if the new law prevented companies from other EU states buying into MOL.

To ease some of the EU’s concerns, MPs approved a last minute amendment, which will require 75 percent support from MOL shareholders to remove board members.

The previous text would have allowed MOL and other firms to set rules on removing board members as they pleased.

Most golden shares held by the Hungarian government have been abolished but in the case of MOL, which has been fully privatised, government approval is required to abolish a rule that limits investors’ voting rights to 10 percent.

Hungary is not alone in legislation to protect what is sees as national champions and there have been similar moves in France, Spain and Germany.

For related factbox see [ID:nL01635064]

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