Euronews is no longer accessible on Internet Explorer. This browser is not updated by Microsoft and does not support the last technical evolutions. We encourage you to use another browser, such as Edge, Safari, Google Chrome or Mozilla Firefox.
BREAKING NEWS

Exclusive: Poland's PKN faces uphill battle to win EU nod for Lotos bid - sources

Exclusive: Poland's PKN faces uphill battle to win EU nod for Lotos bid - sources
FILE PHOTO: The logo of PKN Orlen, Poland's top oil refiner, is pictured at petrol station in Warsaw, Poland April 25, 2019. REUTERS/Kacper Pempel/File Photo -
Copyright
Kacper Pempel(Reuters)
Euronews logo
Text size Aa Aa

By Foo Yun Chee and Anna Koper

BRUSSELS/WARSAW (Reuters) – Poland’s biggest oil refiner PKN Orlen <PKN.WA> is expected to face a full-scale EU antitrust investigation into its planned takeover of rival Lotos and may even face a veto due to their combined market share, people familiar with the matter said.

State-run PKN said last year that it plans to buy at least a 53% stake in its nearest rival Lotos <LTSP.WA>, which has a market capitalisation of 15.9 billion zlotys ($4.23 billion), from the government.

PKN submitted a draft notification of the deal to the European Commission in November and said it expected the Commission’s approval by mid 2019 so that it could be completed by the end of the year.

But the refiner formally requested approval from the Commission only on Wednesday and sources familiar with the situation in Brussels and Warsaw said that due to competition concerns PKN will likely face long and difficult talks with the Commission.

The Commission can either clear the deal with or without conditions after its preliminary review or it can open a four-month long investigation.

Sources said PKN faced the four-month probe since the combination of companies ranked No. 1 and No. 2 in a sector is always problematic for EU competition enforcers.

And in Poland’s case, it is not clear which other rival can step up to provide a viable alternative to the market, they said.

In a statement on Wednesday, PKN argued that its deal would not hurt competition.

“None of the consolidation processes in Europe have in any way limited competition on the respective markets in terms of fuels or logistics. This would also be the case with the merger of PKN Orlen with Lotos,” PKN said.

“The Polish market is very competitive in this area and this is not going to change in the future.”

NOTEASY

At the end of the first quarter of 2019, PKN Orlen and Lotos respectively owned 1,783 and 493 petrol stations in Poland, while oil major BP <BP.L>, which had complained that the merger would restrict competition in Poland, had 550 stations.

Foreign companies owned 1,512 Polish stations out of a total 7,740 stations as of end of March, according to data from POPiHN, a Polish organisation that provides research on the local fuel market.

PKN Orlen’s oil refining capacity in its Polish refinery in Plock amounts at 16.3 million tonnes annually, while Lotos’ capacity stands at 11 million tonnes.

A Warsaw-based investment banker said that PKN Orlen had not yet appointed an investment bank for the deal. Given EU notification deadlines, analysts say it is unlikely to receive Commission approval by the autumn when Poland holds a general election.

The deal might collapse if there is a government reshuffle after the vote, analysts said.

“It will not be easy for them, they will have to give something away. There might be some petrol station swaps, perhaps with a regional player like MOL,” said Michal Kozak, analyst at Trigon.

“It might also happen that PKN will not get the approval due to political risks,” he said, referring to various issues ranging from the judiciary to environment that Poland has been criticised on by the European Union.

PKN has said it first intends to buy 32.99% of Lotos shares from the state and then would announce a tender offer for 66% of shares. The government holds a 27.52% share in PKN Orlen and 53.19% in Lotos.

(Writing and additional reporting by Agnieszka Barteczko, editing by Deepa Babington)

euronews provides breaking news articles from reuters as a service to its readers, but does not edit the articles it publishes. Articles appear on euronews.com for a limited time.