The European Commission has given its conditional approval for Poland’s biggest refiner, PKN Orlen, to acquire a smaller rival, Lotos Group. Also today, Orlen signed a letter of intent to begin a takeover of Poland’s largest oil and gas company, PGNiG.
The EU’s top body granted the deal anti-trust approval, with a number of conditions attached to address concerns about excessive concentration on the European market.
Orlen will be required to sell 30% of its shares in the Lotos refinery and Lotos’s 50% stake in a jet fuel marketing venture with BP. The company will also have to sell 389 of Lotos petrol stations, which amounts to around 80% of the network, and let go of nine fuel storage depots and two bitumen production plants.
“The extensive commitments offered by PKN Orlen will ensure that the relevant Polish markets remain open and competitive and that the merger will not lead to higher prices or less choice for fuels and related products for businesses and consumers in Poland and Czechia,” said EU antitrust chief Margrethe Vestager, reports Reuters.
Deputy prime minister Jacek Sasin, who also heads the Ministry of State Assets which oversees the companies, said that this was one of two “great steps towards the consolidation of Polish energy firms”, which would let them “develop faster and compete on the global market.” For Poland, this would mean “stabilisation and energy security,” he added.
Wicepremier @SasinJacek: Dziś dokonujemy dwa wielkie kroki w kierunku konsolidacji polskich firm energetycznych, które nie tylko będą się lepiej rozwijać, ale i konkurować na rynku globalnym. Polsce zapewnią stabilizację i bezpieczeństwo energetyczne. pic.twitter.com/Nc8IUxOaWU
— Ministerstwo Aktywów Państwowych (@MAPGOVPL) July 14, 2020
The other “great step” mentioned by Sasin concerns another announcement made today, in which Orlen signed a letter of intent to begin talks with the state to take over PGNiG, the country’s largest oil and gas company.
Daniel Obajtek, CEO of Orlen, said that “there is space for one global multienergy syndicate in Poland”. The combined value of Orlen, PGNiG and Energa and Lotos would reach 70 billion zloty.
“We are well prepared with a timeline of action, so that we can make the most of our synergies from the takeover,” said Obajtek. The two companies will now enter negotiations over how to “exchange assets”, reports Business Insider.
In a statement, Orlen said that the consolidation with Lotos will mean more funds being made available for large-scale investments, such as building offshore wind farms.
W wyniku połączenia czołowych polskich koncernów powstanie podmiot o zdywersyfikowanych przychodach, z dużą bazą surowcową, nowoczesnym przerobem, czystą energetyką i zintegrowanym detalem. Będziemy w stanie inwestować w wielkie projekty związane z transformacją energetyczną pic.twitter.com/OxVe00nPYM
— Daniel Obajtek (@DanielObajtek) July 14, 2020
The Polish state currently owns 53.19% of shares in Lotos Group. In the first phase of the takeover, state-owned Orlen will buy 33% of Lotos Group shares from the state. In the next step, Orlen will offer to buy up to 66% of shares (a threshold after which a company is required to offer a tender for all shares) from all other Lotos investors.
Orlen initiated the takeover process of Lotos Group in February 2018. After a letter of intent was signed, the due diligence process started in April that year. In July last year Orlen formally requested the European Commission’s approval for the merger.
The headquarters of Lotos Group will remain in the port city of Gdańsk, where the company will continue to pay corporate and real estate taxes.
Main image credit: Krystian Maj/KPRM/Flickr
Maria Wilczek is deputy editor of Notes from Poland. She is a regular writer for The Times, The Economist and Al Jazeera English, and has also featured in Foreign Policy, Politico Europe, The Spectator and Gazeta Wyborcza.
