x Abu Dhabi, UAETuesday 23 January 2018

OMV to acquire control of Turkey's Petrol Ofisi for €1b

Company strengthens position in Turkey by taking €1bn controlling stake in petrol provider.

OMV of Austria has agreed to acquire control of the Turkish company Petrol Ofisi in a €1 billion (Dh5.12bn) deal that advances the group's plans to make Turkey a strategic centre for its growing international energy interests.

OMV, which is 20 per cent owned by Abu Dhabi's International Petroleum Investment Company (IPIC), struck the deal just two days after restarting talks with Petrol Ofisi's majority shareholder, Dogan Group.

Those talks had been stalled for a year because of Dogan's problems with the Turkish tax authorities.

But last week a Turkish court ruled the beleaguered family-owned conglomerate would have to pay 891 million lira (Dh2.3bn) in disputed taxes and fines, increasing Dogan's motivation to sell its 54.17 per cent holding in Petrol Ofisi.

The proposed transaction, which requires regulatory approvals, would more than double OMV's existing 41.58 per cent stake in Petrol Ofisi to 95.75 per cent, giving it near-total control of the company that owns Turkey's only nationwide chain of petrol stations.

"This acquisition of sole control in Petrol Ofisi further strengthens our position in the Turkish market and is in line with our corporate strategy to further strengthen our leading position in the [central] European growth belt," said Wolfgang Ruttenstorfer, the chief executive of OMV.

"The transaction will put OMV in a favourable strategic position. Turkey is a strategic bridgehead to the Caspian region and the Middle East." In a related move that seems aimed at helping Dogan to resolve its cash problems, OMV said Petrol Ofisi would distribute US$489m (Dh1.79bn) in dividends to its shareholders before the takeover.

Of that, $265m would go to Dogan and $203m to OMV. The remaining $21m would go the holders of the 4.25 per cent of Petrol Ofisi's shares that trade on the Istanbul Stock Exchange. OMV became Petrol Ofisi's second-biggest shareholder in 2006, when it bought 34 per cent of the company for $1.06bn.

The company, based in Vienna, has since broadened its energy holdings in Turkey with a view to establishing it as its third operational hub, after Austria and Romania.

Two weeks ago, OMV said it had started building its first electricity project in Turkey, a €600m, 870-megawatt gas-fired power plant near the Black Sea port of Samsun, which had been on the drawing board for the past three years.

The company is one of six European and Turkish backers of the proposed Nabucco gas pipeline, which if built would transport up to 31 billion cubic metres a year of central Asian and Middle East gas to Europe through Turkey, bypassing Russia. OMV also holds 40 per cent of Enerco Enerji, the second-biggest Turkish gas trader. OMV said strengthening its presence in Turkey's petroleum marketing sector would create opportunities for further expansion of all the company's business segments.

Some analysts have questioned the Petro Ofisi takeover, saying OMV would benefit more from upstream oil and gas acquisitions.

Others have said the company would have trouble entering Turkey's expanding petroleum and petrochemicals sector without controlling Petrol Ofisi. OMV's stock closed at €27.40 in Vienna on Friday, up €0.19 cents. The company announced the Petrol Ofisi deal the next day. Financing the deal could involve a future offering of OMV shares. "OMV retains the clear objective of maintaining a strong investment-grade credit rating and therefore does not exclude raising equity as one of the available funding options," the company said.

IPIC did not respond yesterday to questions about whether it would subscribe for any OMV shares in the event of such an offering. The company, owned by the Abu Dhabi Government, disclosed in January that it had raised its stake in OMV to 20 from 19.6 per cent.

The Austrian company's deal to gain control of Petrol Ofisi follows three failed attempts to expand its downstream oil and gas businesses through acquisitions. In 2006, OMV cancelled a plan to merge with Verbund, the biggest Austrian utility, over political opposition. In 2008, it abandoned a hostile bid for its Hungarian rival MOL after the EU raised competition concerns.

Last November, OMV and Dogan broke off talks over Petrol Ofisi after Ankara slapped Dogan's media arm with a record $3.3bn tax fine that threatened the Turkish group's survival.

Dogan, whose founder Aydin Dogan has been sharply critical of the policies of the Turkish prime minister Recep Tayyip Erdogan, claims the fine was politically motivated.