Poland to merge PKN Orlen and Lotos into state champion

Poland to merge PKN Orlen and Lotos into state champion
The deal will have to be cleared by Poland's competition protection authority and the European Commission.
By bne IntelliNews February 28, 2018

Polish state-controlled refiner and oil and gas producer PKN Orlen has signed a letter of intent to take over at least a 53% stake in peer Lotos, PKN Orlen said on February 27.

Poland has long hinted it would like to merge PKN Orlen with Lotos in order to create a strong company with international importance and also one that – possibly – would be capable of taking part in Poland’s plans to build a nuclear power plant.

“The transaction is aimed at creating a strong, integrated company capable of better competing internationally, resistant to market fluctuations through utilisation of operating and costs synergies between PKN Orlen and Lotos Group,” the company said in a statement.

The deal will have to be cleared by Poland's competition protection authority UOKiK and – according to UOKiK – by the European Commission and will take about a year to complete.

The coming merger is in line with the government’s policy of exerting tighter state control of strategic companies. In a similar vein, state-controlled PZU has been building a banking group, having taken over control of the second-largest Polish bank, Pekao, formerly controlled by Italy’s UniCredit.

In the electricity sector, state-controlled PGE took over the Polish assets of France’s EDF last year, while another state energy champion, Enea, gained control of the Polish business of another French company, Engie.

The merger comes as PKN Orlen has strengthened its position in the Czech Republic following last week’s move to up the company’s stake in Czechia’s Unipetrol to 94%.

The market capitalisation of PKN Orlen is around PLN40bn (€9.6bn), while Lotos is worth some PLN10bn.

PKN Orlen’s shares gained over 5% at closing on the Warsaw Stock Exchange on the day of the merger announcement. Lotos’ stock grew 7.3%.

The Polish state currently controls PKN Orlen via a 27.5% stake while most of the remaining shares are held via the free float. The state’s stake in Lotos, which is the minimum target for PKN Orlen, is 53.2%.

Poland dismissed PKN Orlen CEO Wojciech Jasinski on February 5, replacing him with Daniel Obajtek, who has little managerial experience in running top-flight companies and is seen a political appointment. 

 

 

 

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