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EU takes closer look at OMV's MOL bid



By Upstream staff 

The European Commission will open an in-depth competition investigation of Austrian player OMV's bid to take over Hungarian peer MOL, it was claimed today.

However, a Commission spokesman said it had not yet made a formal decision about launching a probe.

"No decision has been taken on this case," Commission spokesman Jonathan Todd told a daily news briefing, adding the European Union executive had until 6 March to decide whether to launch such an investigation.

Earlier today, a person with knowledge of the matter told Reuters the Commission was poised to open an investigation into the proposed deal.

OMV has asked the Commission, executive arm of the European Union, to clear the bid but EU competition regulators must first verify that the deal would not harm competition.

MOL has fought the takeover since last summer, when OMV first indicated its plans.

The source told Reuters the probe will look specifically at transmission networks and petrochemicals.

Such reviews do not necessarily mean a deal will be forbidden, nor even that it will have conditions attached.

First, the Commission wants to know more about what will happen if the pipelines, storage tanks and other distribution facilities of both companies fall under single ownership.

It considers this a so-called horizontal issue, looking at what would happen by combining each company's chunk of the market.

Each company already holds a strong share in its own market and combining them would make the situation even less competitive, MOL has argued.

MOL claims the geography of the region makes transport of oil and gas difficult because countries there lack sea access, with only the Danube to move barges, far smaller than tankers.

That raises the stakes for possession of pipelines, because it is expensive to move oil and oil products by truck or rail.

Second, the Commission will look at the so-called "vertical" or "upstream-downstream" issue involving the chain that begins with crude oil and winds up with petrochemicals such as gasoline, diesel, home heating oil and aircraft fuel, Reuters said.

The two companies would have a joint refining capacity in excess of 860,000 barrels of oil equivalent per day.

MOL argues that in some countries there would be near-monopolies, allowing a combined company to raise prices more than they would in a competitive situation.

MOL argues the problem is particularly acute in Hungary, Slovakia and Austria.


Friday, 29 February, 2008, 10:06 GMT  | last updated: Friday, 29 February, 2008, 12:16 GMT

Commission action: a source has told news agency Reuters that the European Commission wants to take a closer look at OMV's bid for MOL
 

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