Austrian oil and gas group OMV upped the ante in its battle to take over Hungary's MOL on Tuesday, telling MOL shareholders it would pay $20 billion if they overruled board opposition.
OMV, which now owns 20 percent of MOL, launched its bid to create central Europe's biggest energy group in June. Despite saying it sought MOL's approval, OMV met fierce resistance from management, and on Tuesday it turned to shareholders instead.
OMV is ... seeking to engage in active discussions with the independent shareholders, the European Commission and other stakeholders in MOL, it said in a statement.
OMV said it was ready to offer 32,000 forint for each MOL share, or 3.5 trillion forint ($20 billion) in total, if MOL removed a 10 percent voting right cap and if the 40 percent stake in MOL its board and friendly institutions control was cancelled or neutralized.
The removal of these impediments would allow MOL's independent shareholders to decide on the merits of the offer. So far MOL shareholders have been denied this choice through the actions of MOL's Board.
MOL's board once more rejected OMV's move. It said the offer undervalued its business significantly and repeated it would not hold talks with its Austrian rival.
MOL launched an aggressive share buyback program to fend off OMV's bid. It and friendly institutions now control 40 percent of MOL's stock. It also lobbied Hungary's government to draft a law to restrict foreign ownership in strategic companies.
Under MOL's articles of association, no shareholder can exercise more than 10 percent of the company's voting rights.
We believe MOL management are unlikely to yield control in the short term, Merrill Lynch analyst Alastair Syme said in a note to clients. The process is likely to be long and drawn out with a quick resolution unlikely to be found.
OMV shares dropped as much as 7 percent on the news, and were down 5.4 percent at 48.80 euros by 1025 GMT, the biggest decliner in the DJ European Oil & Gas index. MOL shares were suspended until further notice.
STRONG HUNGARIAN REPRESENTATION
The proposed price represents a 19 percent premium to MOL's share price at Monday's close. OMV said it was prepared to offer up to 25 percent of the price in OMV shares.
The offer would be conditional on securing at least 50 percent of voting control of MOL and on EU antitrust approval. The combined business would be listed in Austria and Hungary, and would have strong Hungarian board representation, OMV said.
OMV said it had given preliminary notice to the European Commission that it was seeking to take over MOL.
It said it expected to make some disposals to please the antitrust watchdog, but those disposals did not make the deal less attractive.
Hungary has drafted legislation to stop foreign companies owned or part-owned by the state from acquiring Hungarian energy companies and said on Tuesday it would keep pursuing this law.
The Austrian government holds 31.5 percent of OMV. Finance Minister Wilhelm Molterer said he welcomed OMV's move. He has said before Austria was ready to let its stake be diluted if OMV had to raise equity to fund a strategic purchase.
Czech electricity producer CEZ, which said in early September it would take a minority stake in MOL, said it would not comment on the news, although it added it had nothing to change in its plan for a tie up with MOL.
(Additional reporting by Balazs Koranyi in Budapest)