Global Insight Perspective | |
Significance | Hungarian Prime Minister Ferenc Gyurcsany and Austrian Chancellor Alfred Gusenbauer have jointly indicated that MOL and OMV should be left to resolve their current stand off themselves, but such statements belie the fact that the two governments are already inextricably involved in the saga. |
Implications | The cordial statements delivered by the respective leaders contrast with other statements made as recently as this week that have revealed their diverging, ingrained views on the matter. |
Outlook | While both governments may have vested interests, they would do well to abide by their own words and leave a resolution to the matter in the hands of the companies involved and the European Commission (EC), or risk a potentially lasting rift in their relations. |
An Agreement to Disagree?
A joint Cabinet meeting between the governments of Hungary and Austria has seen the two countries' leaders discuss the current stand off over OMV's takeover approach for MOL, and apparently agree to leave a resolution to the stand off in the hands of the two companies involved. Speaking after the meeting, Hungarian Prime Minister Ferenc Gyurcsany said: "This is a deadlock…The firms created it, they should solve it, and it shouldn't endanger the fine relationship of the two governments." Austrian Chancellor Alfred Gusenbauer reiterated these sentiments, stating the countries’ governments should "clearly not interfere". He added that "it would make sense for the two managements [of MOL and OMV] to discuss co-operation possibilities…In our experience time solves these issues."
While the statements by the two leaders give the impression of cordiality and agreement on the issue, they belie the fact that both governments have already taken strong stances on the matter and left little doubt that they do not see eye-to-eye. Just this week, Gyurcsany met the chief executive of OMV and reiterated his commitment to do all within his means to prevent the company from taking over MOL (see Hungary: 29 November 2007: Hungarian PM Meets OMV Chief, Continues to Oppose MOL Takeover). In fact, these statements of opposition were confirmed in an official release by the Prime Minister's Office following the meeting, leaving little doubt over Gyurcsany's personal view on the desirability of such a takeover.
However, both Gyurcsany and Gusenbauer have recognised the need to take a less combative stance on the issue at a political level; hence, the joint statements on leaving the issue to the companies involved to resolve. Of course, it is abundantly clear that neither government has adopted such a passive, neutral stance on the matter, and, despite their joint statements, it looks no more likely that they will do so in the near future. Indeed, both governments are already inextricably involved in the issue: the Austrian government as a 31.5% owner of OMV; and the Hungarian government as the designer and champion of the "lex-MOL" legislation, widely seen as specifically intended to block the takeover of MOL. With both sides being fully aware of their counterpart's view, the recent statements to stay out of the matter are essentially an "agreement to disagree": an exercise in diplomacy rather than a true statement of either side’s intentions.
MOL to Face Fines?
In a separate development today, Nepszabadsag reported that Hungarian financial watchdog PSZAF is planning to fine MOL over its programme of share buybacks, which it initiated in June in response to OMV's original approach. MOL has now built up control of close to 40% of its own stock via a series of share-loan agreements with other shareholders, circumventing regulations that cap ownership at 10%. PSZAF declined to comment on the issue, however. The regulator fined OMV 25 million forint (US$145,600) in September, alleging the company's initial takeover offer had misled investors (see Hungary: 1 October 2007: Support Builds Among MOL Shareholders for Takeover Offer; OMV Fined by Hungarian Watchdog).
MOL-CEZ Deal Delayed Until 2008
Meanwhile, Czech electricity company CEZ has indicated that discussions with MOL on the creation of a joint venture are now unlikely to reach a conclusion until 2008. The companies had previously stated they would conclude talks before the end of 2007. The agreement is expected to see CEZ take a 10% equity stake in MOL, potentially adding to the Hungarian company's defences against a hostile takeover (see Czech Republic: 31 August 2007: CEZ, MOL to Form Strategic Alliance).
Outlook and Implications
The meeting between the Hungarian and Austrian governments and their subsequent statements on the OMV-MOL saga reflect the national importance of the issue and the potential political ramifications arising from the events. Indeed, the statement from Gyurcsany that the matter "shouldn't endanger the fine relationship of the two governments" is an explicit recognition of the fact that the issue presents precisely this risk. With the issues of national sovereignty and energy security hovering in their minds, it is clear that both governments have a strong vested interest in the outcome of the current takeover stand off. As such, it is difficult to see them stepping back from the issue, as their statements suggest, to leave it solely in the hands of OMV and MOL.
In one positive sign, Hungarian Economy and Transport Minister Janos Koka yesterday suggested that Hungary may look to "fine tune" the lex MOL legislation introduced to block the OMV takeover to appease concerns raised by the EC over its compliance with European Union rules (see Hungary: 14 November 2007: EU Issues Formal Notice Over Lex-MOL Law; Hungary Ready to Fight). However, the extent and nature of any such amendments remains unclear.
If the Hungarian and Austrian governments do indeed want to avoid the OMV-MOL issue impacting on their long-term relations, they would do well to take their own advice and let the matter be decided by the respective management groups and shareholders of the two companies, and leave the EC to exercise its mandate as the regulator responsible for such cross-border deals.