Wednesday, October 10, 2007

OMV attempt at MOL: Kicking out foreigners

This makes a good truism of the day:

Hungary's passing of “lex MOL" a law aimed at shielding strategic companies from hostile takeovers, is a brutal attempt by the state to protect private interests, Lajos Bokros, Hungary's former Finance Minister and now deputy chief of Budapest's Central European University (CEU) told the Financial Times on Wednesday.

This is from, but the summary is very correct. I won't go into the background to this offer of OMV merging with (taking over) MOL, but to say that the passage of the latest law in Hungary does do what Bokros points out. More importantly, and within reason, as Bokros points out in the same FT article:

"Bokros said lex MOL protected Hungary's business “oligarchs", headed by Hernádi, Csányi and the politicians who receive political donations from such oligarchs."

How true is this? I would believe very, as the excuse that MOL is now offering as to why this deal is NOT going to happen is very weak. That is as explained, in the FT, by Mr. Hernádi:

"However, officials were looking at the fact that Mol was now under threat from a state-dominated group, he pointed out.

“They have said, ‘Why am I selling and another state is buying?’ ”

More pointedly as also stated in the FT:

Mr Hernadi told the Financial Times that government officials across the region were calling to express concern that Mol, a fully privatised company, was facing an unsolicited offer from OMV – a company in which the biggest shareholder is the Austrian state, with 31 per cent.

Now to my point: Hungary has a rich history of selling off its energy assets to foreign firms and to companies owned by foreign governments. We can just see that EDF and Gaz de France are in Hungary - they have a large share of government ownership. Does this mean that the Hungarian government will be kicking out and re-nationalizing the distribution companies that they own?

If we look at the present, the current deal under consideration between E.ON and Gazprom for E.ON to swap a minority share (49%) in its gas storage division in Hungary, plus other assets, is bringing in a foreign government owned company into Hungary. Is this now forbidden?

If the logic of Mr. Hernadi , the MOL board and the Hungarian government is to be believed, we should be expecting not just action against OMV, but against other companies as well.

I rather like's ending to their story:

"management are likely to be in a rather awkward position when they need to explain why HUF 27,500 is more than HUF 32,000.