Russia invades the Hungarian energy sector | FT Alphaville

Russia invades the Hungarian energy sector

By Haig Simonian in Zurich

A Russian oil company loyal to the Kremlin on Monday bought Austrian energy group OMV’s stake in MOL, the Hungarian energy group, for twice its market value.

The deal involving Surgutneftegas is likely to sound alarm bells in Hungary, where MOL had fought fiercely to guard its independence, and at the European Commission, where there is concern about the rising role of Russian energy groups in the region.

The sale drew a final line under OMV’s two-year struggle to buy its Hungarian rival. It said it had raised €1.4bn by selling its shares to one of Russia’s biggest oil companies. OMV had hinted last year that it could sell its stake to an expansion-minded Russian producer. Surgutneftegas is focused on production from the Surgut region of western Siberia, which accounts for about 13 per cent of Russia’s oil output, but has so far shied away from big foreign acquisitions.

It gave little indication of its long term intentions, limiting its comment to a short statement from Vladimir Bodganov, its top executive. “Acquisition of Mol shares will establish a firm foothold to start long term beneficial co-operation and will promote energy security in Europe”, he said.

The Russian group employs more than 100,000 people and reported sales of Rbs475bn ($14bn) in the first nine months of last year, and net profits of Rbs120bn.

OMV said it had achieved a “good price” for its Mol shares, which had been built up at varying prices from an initial 9 per cent holding. The Austrians said they had sold the shares,  in a transaction handled by JPMorgan, for Ft19,212 a share, compared with Mol’s closing price of Ft9,940 on Friday.

OMV decided last August not to proceed with its offer for Mol after the European Commission indicated it would pose stiff conditions for any transaction to go through. Mol, which had  resisted the Austrians from the start, said the Commission’s view vindicated its arguments that a merger would have destroyed value, as it would have required significant asset sales to meet competition rules.

The Austrian group accepted the decision, but Wolfgang Ruttenstorfer, its chief executive, had warned that OMV could sell the shares to a Russian group, which the Hungarians might find less palatable as a major shareholder than OMV itself. Mol shares rose 7 per cent to Ft10,650 following the announcement.