July 4, 2019 / 11:06 AM / 4 months ago

Exclusive: Poland's PKN faces uphill battle to win EU nod for Lotos bid - sources

BRUSSELS/WARSAW (Reuters) - Poland’s biggest oil refiner PKN Orlen (PKN.WA) is expected to face a full-scale EU antitrust investigation into its planned takeover of rival Lotos and may even face a veto due to their combined market share, people familiar with the matter said.

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

State-run PKN said last year that it plans to buy at least a 53% stake in its nearest rival Lotos (LTSP.WA), which has a market capitalisation of 15.9 billion zlotys ($4.23 billion), from the government.

PKN submitted a draft notification of the deal to the European Commission in November and said it expected the Commission’s approval by mid 2019 so that it could be completed by the end of the year.

But the refiner formally requested approval from the Commission only on Wednesday and sources familiar with the situation in Brussels and Warsaw said that due to competition concerns PKN will likely face long and difficult talks with the Commission.

The Commission can either clear the deal with or without conditions after its preliminary review or it can open a four-month long investigation.

Sources said PKN faced a four-month probe since the combination of companies ranked No. 1 and No. 2 in a sector is always problematic for EU competition enforcers.

And in Poland’s case, it is not clear which other rival can step up to provide a viable alternative to the market, they said.

In a response to Reuters e-mailed on Thursday, PKN said the formal request for the Commission’s approval submitted on Wednesday comes after a year’s worth of preparation and talks with the Commission.

“The presentation of the transaction and its potential impact on competition in the region are therefore not new or surprising for the EC,” PKN said.

It added it expects to complete the deal as described in a letter of intent signed in February 2018 with the Polish state, by the end of the year. The letter assumed that PKN will buy at least 53% of Lotos shares.

NOT EASY

At the end of the first quarter of 2019, PKN Orlen and Lotos respectively owned 1,783 and 493 petrol stations in Poland, while oil major BP (BP.L), which had complained that the merger would restrict competition in Poland, had 550 stations.

Foreign companies owned 1,512 Polish stations out of a total 7,740 stations as of end of March, according to data from POPiHN, a Polish organisation that provides research on the local fuel market.

PKN Orlen’s oil refining capacity in its Polish refinery in Plock amounts at 16.3 million tonnes annually, while Lotos’ capacity stands at 11 million tonnes.

A Warsaw-based investment banker said that PKN Orlen had not yet appointed an investment bank for the deal. Given EU notification deadlines, analysts say it is unlikely to receive Commission approval by the autumn when Poland holds a general election.

The deal might collapse if there is a government reshuffle after the vote, analysts said.

“It will not be easy for them, they will have to give something away. There might be some petrol station swaps, perhaps with a regional player like MOL,” said Michal Kozak, analyst at Trigon.

PKN may also not get approval due to political issues, he said, referring to EU criticism of Poland on issues ranging from the judiciary to the environment.

PKN has said it first intends to buy 32.99% of Lotos shares from the state and then would announce a tender offer for 66% of shares. The government holds a 27.52% share in PKN Orlen and 53.19% in Lotos.

Writing and additional reporting by Agnieszka Barteczko, editing by Deepa Babington and Alexandra Hudson

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below