Saudi Aramco and MOL buy Lotos assets to make PKN Orlen-Lotos merger possible

Saudi Aramco and MOL buy Lotos assets to make PKN Orlen-Lotos merger possible
PKN Orlen's oil tanks
By bne IntelliNews January 12, 2022

The world’s biggest oil and gas company, Saudi Aramco, and Hungarian state-controlled MOL have bought assets of Poland’s Lotos Group in a deal required by EU authorities as a condition for the merger of Lotos with larger peer PKN Orlen, the companies announced on January 12.

The merger is expected to go through by the middle of the year. The European Commission cleared the takeover last year pending PKN Orlen’s meeting a list of conditions, such as divesting a 30% stake in a Lotos refinery in Gdansk and the sale of 80% of its fuel stations.

Saudi Aramco bought the stake in the Gdansk refinery for PLN1.15bn (€250mn) as well as 100% stakes in Lotos’ wholesale subsidiaries Lotos SPV 1 and Lotos-Air BP Polska. Saudi Aramco will pay approximately PLN1bn for Lotos SPV 1 while the value of the other deal was not disclosed.

Following Saudi Aramco’s buy-in, PKN Orlen will gain access to long-term oil supplies from Saudi Arabia, up to 337,000 barrels per day, which will be able to meet 45% of the demand of the entire Orlen Group, in Poland, Lithuania and the Czech Republic, the company said.

In the other leg of the merger-clearing deal, Hungary’s state-controlled oil and gas firm MOL will buy Lotos’ retail operations, consisting of 417 petrol stations in Poland for USD610mn (€536.8mn) plus a variable component depending on debt and working capital of Lotos’ retail subsidiary Lotos Paliwa.

The deal with MOL also assumes that PKN Orlen will buy some 144 petrol stations in Hungary from MOL and 41 in Slovakia for €229mn.

Following the merger with Lotos, PKN Orlen’s next goal is taking over another state-controlled entity, the oil and gas exploration and production company PGNiG, PKN Orlen’s CEO Daniel Obajtek told reporters.

The end goal is creation a state-controlled energy giant, able to move closer to giants like BP, Total, Shell, or Repsol, which are investing in their value chains and in prospective branches such as renewables or hydrogen.

“This is a historic moment … We are creating the strongest fuel and energy company in this part of Europe. The merger of PKN Orlen and Lotos is a gigantic opportunity for the development of Poland!” Obajtek enthused on Twitter.

The rumours of the MOL deal surfaced earlier this week in the media, prompting PKN Orlen to say they were “speculation”.

The deal with MOL also attracted criticism from Poland’s opposition, which said that the next step would be MOL selling the petrol stations to Russia’s Lukoil or Rosneft. MOL and Lukoil have a history of cooperation, the Polish opposition pointed out.

A side deal also involved Polish company Unimot Investments’ purchase of four fuel depots from Lotos.

PKN Orlen’s share price on the Warsaw Stock Exchange jumped nearly 4% to PLN82.3 following the official announcement of the deals. The company’s shares thus climbed closer to the five-year peak seen in October last year.

MOL's price on the Budapest Stock Exchanged grew 1.13% to HUF2,678 (€7.52). Saudi Armaco's stock was virtually flat, falling 0.14% to SAR35.95 (€8.43) in Riyadh.