Hungary's MOL inching towards majority in Croatia's INA

By bne IntelliNews October 8, 2014

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MOL is closing in on the acquisition of a 0.8% stake in Croatian oil and gas company INA, according to local press, which would bring the Hungarian group within a whisker of a majority in the company, over which it is fighting a bitter battle with Zagreb.

MOL is close to clinching a deal to buy 80,000 INA shares from Raiffeisen Bank International's (RBI) pension fund in Croatia for at least HRK320m (€42m), according to Croatian daily Poslovni Dnevnik, which named no source for the story. The pension fund's parent, RBI, was hired by MOL as advisor regarding its holdings in INA, the newspaper points out. 

Should the purchase go through, MOL would be within a hair’s breadth of taking control of INA. The Hungarian oil and gas company currently holds 49.08%. The Croatian state, which has been fighting to regain operational control of INA, retains 44.84%. 

MOL launched a failed attempt to gain control via an offer to holders of the free float in 2010, although it did manage to scoop up a stake of around 1.6%. News of the potential purchase from RBI pushed INA shares higher on the Zagreb bourse.

Alarm

MOL's inching towards a minority will alarm a cash-strapped Zagreb, which has been trying to block  MOL since the latter bought a second chunk of INA and gained operational control in 2009. Zagreb insists the deal was corrupt. Former PM Ivo Sanader has been jailed for 10 years for taking a bribe and Zagreb has tried and failed in its attempts to prosecute MOL chief Zsolt Hernadi, with Budapest backing its man strongly. 

Since the middle of September, tempers in Zagreb and Budapest have frayed as they discussed the fate of INA's two refineries, which are struggling in the face of low margins. MOL is pushing to close one; Zagreb, already under huge pressure over the state of the economy, is fighting to protect jobs. 

Both Zagreb and MOL suggested earlier this year that they could sell their stakes in order to find a way out of the mess. However, the assets are strategic for both. Croatia wants energy security and to protect a key industry; MOL has few assets offering strong upstream potential such as INA's exploration activities. 

On top of that, to sell, they would have to work together to agree to offer a majority stake to any potential buyer. The fact that it is only Russian state-owned giants that have shown any interest makes such a deal even more unlikely. Zagreb is worried that Russian-owned regional refineries would threaten INA's, while the current political climate would make such a sale impossible.

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