MOL Places High Bid for INA

Hungary's MOL heavily outbid its one of its rivals, OMV for a stake in Croatia's state oil company INA. MOL put a $505 million price tag on the 25 percent stake in INA, well above the expected offers of $350-400 million, and $85 million more than offered by Austria's OMV.

Rosneft backed out from the bidding after the government rejected its request to buy a majority stake in INA, Croatian Economy Minister Ljubo Jurcic said.

"I am very pleased with the offers. What remains now is just fine-tuning between government and bidders," he said. Along with the cash sum, the government will look at the bidders' development and partnership plans for INA, Croatia's largest state firm with 16,000 employees, and will probably chose the strategic partner next Thursday, Jurcic said.

An $85 million difference in the two bids will be hard to beat. The only thing that can now play a role is politics. Austrians have always had a better rating in Croatia, while Hungary is still viewed as part of the former Eastern block.

INA has drilling, refining and retail segments and a good location linking central Europe and the Adriatic. It has been valued at 1.2-1.8 billion euros ($1.36-2.04 billion) overall.

MOL, OMV and Rosneft submitted preliminary offers for INA in January and have held three rounds of talks since. MOL and OMV have been battling for supremacy in the region in the last few years. Beside INA, they are also eyeing strategic or capital ties with east Europe's largest refiner, Polish oil and chemicals group PKN Orlen.

OMV is eager to boost its refining and retail capacity in the growth markets of southeastern Europe, while MOL said it was offering cash and a chance for INA to get a stake in MOL and MOL-controlled Slovak refiner Slovnaft later.

The new strategic partner will have to retain all of INA's 16,000 workforce for three years and back a growth plan that includes $1.6 billion investment in upstream projects, expansion of the retail network and overhaul of two ageing refineries. The partner will have a significant say in running the company, including two members of the seven-man management board, where all strategic decisions will have to be reached through consensus of the local and foreign members.

The sale may be followed by a flotation of 15 percent on the local bourse, but the strategic partner will not be allowed to increase its stake to a majority nor sell it on without government consent.

INA's net profit in 2002 rose to 982 million kuna ($154.1 million) from 358 million the previous year, thanks largely to divestments and cost-cutting, despite lower sales.