Hungarian oil company MOL, which recently rebuffed a takeover from OMV, has stolen a march on its Austrian rival to acquire INA of Croatia, where regulators approved MOL's bid on Monday.
MOL, which already owns 25 percent of INA, Croatia's dominant fuel retailer, offered 2,800 kuna ($576.6) per share, or 1.2 billion euros ($1.76 billion), for the 31 percent not held by MOL or the Croatian government.
Analysts said the bid, which values the whole of INA at 3.9 billion euros, was lower than expected, but still likely to succeed.
A successful takeover would strengthen MOL's position in Central Europe and would deal a blow to the expansion hopes of OMV, which gave up long-held plans to buy MOL in early August and had also expressed interest in INA, analysts said.
"This is well below what the market was expecting; we had penciled in a price over 3,000 kuna, and this offer is near the legal minimum," ING oil sector analyst Tamas Pletser said.
The Croat government holds 44 percent of INA but has promised to cut its stake to 25 percent before it joins the European Union, possibly in 2011.
It has held talks with MOL over selling the stake and said it would also consider a share swap with MOL.
The country's war veterans hold 14 percent of INA, while 17 percent is listed on the stock exchange.
"Looking at the price, it seems MOL feels sure it can buy a 19 percent stake from the government and some of the veterans' shares to get a majority," Pletser said.
To Keep INA Listed
Pletser said MOL's relatively low offer may reflect the Croatian government's fear that INA, the most liquid stock on the Zagreb bourse, would disappear from public trading.
He argued that the 2,800 kuna bid may be low enough to discourage most of the public from selling and keep the stock liquid, while MOL could still gain close to a majority through buying the government's stake.
Other analysts also said a deal between MOL and the Croatian government, expected in September or October, would be key.
"We still don't know what the deal is between MOL and the Croat government. That's the key to everything, as 25 percent and 19 percent sound pretty good as a start," Raiffeisen Bank analysts Akos Herczenik said.
"It's very unlikely that the deal with the government will be an all-cash offer," Herczenik said. "It will involve MOL shares and other things we don't know yet."
OMV spokesman Thomas Huemer said OMV was still interested in INA if it were invited to take part in the privatization, but he declined to comment on MOL's offer price.
Some analysts said MOL might also have kept its bid low in order to limit its cash expense, as buying the free float and the government's 19 percent could cost close to 2 billion euros.
"They have the credit facility to pay for that, but their credit rating would get downgraded, and their gearing would shoot up," Pletser said.