Michael Logan in Budapest -

Ever since Austrian oil and gas group OMV first moved for Hungarian peer Mol in June, it has been clear it isn't prepared to take "no" for an answer. Despite constant rejections and the involvement of the Hungarian government and the European Commission in the battle, judging from OMV's latest move on Tuesday, December 4 it appears the firm feels it has its claws firmly embedded in its prey.

OMV started its push in June when it upped its stake in MOL to 18.6% and called for talks. It then in September increased its stake to 20.2% and offered HUF32,000 (€128) per share - almost 30% more than current share trading prices. Mol angrily told OMV where to go. When the European Commission in November announced it would start lengthy proceedings against the Hungarian government for introducing a law to protect Mol and other "strategic" firms, it appeared that all interested parties were settling in for a long wait.

But OMV is proving relentless. In an updated "Declaration of Intent" released on Tuesday, December 4 the company threatened to call an extraordinary shareholders meeting if the Mol board continues to reject talks and also announced it was launching litigation in Hungary against rules in Mol's articles of association that hinder a takeover.

OMV's decision to push further for what it calls a "combination" - a polite term for what everyone else views as a hostile takeover - is driven by a belief it is making progress, bolstered by investor support and the Commission's investigation. "We have approached the majority of Mol's major shareholders and received overwhelming support for our plans," OMV spokesman Thomas Huemer told bne.

This claim appears to be more than just hot air.

Shareholder champion

Several major investors have publicly echoed OMV's key arguments that a merger would create investor value and fend off takeover attempts by Russian firms eager to get a slice of the European energy market.

Emboldened by this support, OMV is increasingly casting itself as the shareholders' champion. "If we do not get a response [from the Mol board], then in the name of other shareholders, we are prepared to go for an EGM. We are in a position to bring this about," Huemer says.

The Commission's move to challenge "Lex Mol" (the new law on Mol) on the grounds that it violates anti-competition directives has also encouraged OMV. "It is crucial within the EU that shareholders decide - not management who have non-transparent control of shares," Huemer says. "Now it's up to the EU."

However independent analysts are not so sure that OMV is doing anything other than posturing and even if the government is forced to modify Lex Mol, the Mol board's slightly unsavoury controlling vote will also somehow have to be dismantled.

Mol's board circumvented a 10% cap on voting rights by buying back shares, which it then lent out to institutions with close links to board members. The board is now believed to indirectly control almost 42% of the company's voting rights. OMV feels this is an attempt to "take away the ultimate control of the company from its own shareholders" and its stance was last week boosted by reports that Hungary's financial watchdog PSZAF is planning to fine Mol over the share buyback programme.

The Austrian firm is also bringing a legal challenge in Hungary against the 10% voting cap and other Mol rules. While the chances of OMV winning in a Hungarian court are slim at best, this only highlights how determined the Austrian firm is to use any weapon at its disposal.

Whether these weapons are enough remains to be seen. Given that Mol immediately retorted that it still believed a takeover would be value destructive, OMV will likely have to make good on its EGM threat. While an EGM stuffed with angry shareholders may well prove uncomfortable for the board, it is unlikely to hand OMV victory. The Austrian firm needs the 10% voting cap and other obstacles removed in order to launch its takeover bid - it made its share offer conditional on just such a move - but with a 75% majority needed to do this, the numbers do not add up.

OMV may well have its claws in, but Mol is still alive and kicking.

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