The European Commission has given the green light for Polish state oil giant Orlen to take over its smaller rival Lotos, in a deal that the firm – and its backers in the Polish government – believe can help turn the energy group into a global player.
“We have obtained the approval of the European Commission for the merging of PKN Orlen and Grupa Lotos,” announced Daniel Obajtek, Orlen’s CEO.
“This is a groundbreaking moment for the effective implementation of the energy transformation, increasing the resource independence and security of the region,” he added, noting that the final hurdle is now for shareholders in both companies to give their approval to the deal.
Zgoda Komisji Europejskiej jest sukcesem. Oznacza pełną akceptację dla wynegocjowanych przez Grupę ORLEN umów i partnerów do ich realizacji. Jest także potwierdzeniem, że połączenie nie zaburzy konkurencji w żadnym z obszarów działalności nie tylko w Polsce, ale też w regionie pic.twitter.com/8VQqRKPTUK
— Daniel Obajtek (@DanielObajtek) June 20, 2022
Orlen – which is the largest company not only in Poland, but in the entire Central and Eastern Europe region, according to an annual ranking by Coface – initiated the takeover process of Lotos in 2018. In 2020, the European Commission gave its conditional approval.
Among those conditions was that Orlen sell off some of the new group’s assets to meet antitrust requirements. In January this year it did so, selling a 30% stake in Lotos Asfalt – which owns the Gdańsk oil refinery – to Saudi Aramco and hundreds of Lotos’s petrol stations to Hungary’s MOL.
In its statement today, Orlen said that the commission has now approved those deals. Obajtek says the merger is on track to be completed in late July or early August.
The merger is seen as part of a wider attempt by Poland’s government to foster a national champion. Orlen is currently waiting for approval from the Polish anti-trust authority to also take over Poland’s largest oil and gas company, state-owned PGNiG.
The combined value of the group – including Lotos and Energa, an energy firm already bought by Orlen – would reach around 70 billion zloty (€15 billion). The state treasury, which current owns 27.51% of shares in Orlen and 53.19% in Lotus, would hold around 35% of the new group, reports Interia.
However, the opposition has criticised aspects of the deal, including the fact that it involves selling off Polish-owned assets to foreign energy groups. They have also claimed that MOL has ties to Russia and that Hungary in general is close to the Kremlin, especially on energy policy.
Orlen and government figures have pointed out that, when the opposition Civic Platform (PO) was in power, its current leader and then prime minister Donald Tusk stated that he was not opposed to the sale of Lotos to Russian buyers. They also note that Russia’s Surgutneftegas long ago sold its stake in MOL.
As it absorbs smaller firms and increases international activity, Polish state oil giant Orlen has a chance to join the European elite.
But the ambitions of CEO Daniel Obajtek and his backers in government will come at a high price, writes @jakubwiech https://t.co/fzwMNhCgtg
— Notes from Poland 🇵🇱 (@notesfrompoland) February 9, 2022
Announcing the European Commission’s decision today, Obajtek – a former small-town mayor who is seen as having close ties to the ruling Law and Justice (PiS) party – criticised previous administrations for their “lack of vision” in not pursuing a merger of Orlen and Lotos.
He has previously pledged to turn the new, combined group into a “global multienergy syndicate”. Poland’s minister for state assets, Jacek Sasin, said in 2020 that the merger will bring “stabilisation and energy security”.
Since the invasion of Ukraine, the Polish government has accelerated its plans to end the import of Russian energy supplies. Orlen – previously a big importer of Russian oil – has expressed support for that goal, and Obajtek says that the deal with Saudi Aramco – which will bring Saudi oil to Poland – will help those efforts.
Main image credit: Orlen press materials
Daniel Tilles is editor-in-chief of Notes from Poland. He has written on Polish affairs for a wide range of publications, including Foreign Policy, POLITICO Europe, EUobserver and Dziennik Gazeta Prawna.
