abarrelfull wrote on 07 Jul 2014 08:40
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2000-04-03
On Friday, March 31, 2000, MOL, one of Hungary`s largest corporations and Central Europe`s leading integrated oil and gas company signed an agreement to become the strategic investor in Slovnaft, the leading Slovakian oil company. In the agreement MOL will acquire an initial equity stake of up to 36.2% for a total consideration of approximately US$ 262 million. The acquisition, which is Central and Eastern Europe`s first major intra-regional cross border transaction, will create a regional downstream champion with a leading position in Europe`s fastest growing oil product markets. It will be executed through a US0 million increase in Slovnaft`s equity and the purchase of existing shares.
Following the completion of the transaction MOL will be the largest single shareholder of Slovnaft. Together, MOL and the two management companies, Slovintegra and Slovbena (currently owning majority of Slovnaft), will own over 50% of the share capital of Slovnaft. The exact percentage will depend on the take-up of new shares by existing shareholders under their pre-emption rights. The transaction will improve the capital structure of Slovnaft, resulting in lower leverage and higher financial flexibility for the company.
Following eight full financial quarters from subscription, MOL will have the option to purchase further shares in Slovnaft so that it gains ownership of at least 50% plus one vote of the share capital of Slovnaft. From that time MOL will be able to control the company and propose the majority of the Slovnaft Board of Directors. Following MOL`s move to majority Slovintegra and Slovbena are expected to retain a significant minority shareholding position in Slovnaft and will have appropriate rights to ensure their interests as shareholders through representation on the Board of Directors of Slovnaft.
The acquisition, which is subject to anti-trust approvals and other conditions precedent, is expected to close by the end of the third quarter of this year.
Under the terms of the acquisition agreement, for the initial eight full financial quarters, MOL will propose 4 of the 8 members of the Slovnaft Board of Directors and MOL is committed to providing and sharing with Slovnaft its extensive management expertise in a number of key areas. MOL will nominate - at the key top-level management - the CFO, the Head of Sales and Marketing, the Head of Retail Operations and the Head of Procurement/IT. Other senior management positions will be mutually agreed at a later stage. Slavomir Hatina will remain as CEO and Chairman of the Board of Slovnaft.
Through this partnership, MOL will have a leading position in Europe`s fastest growing oil product market, with projected demand growth significantly above the European average. The two companies will together have an estimated 36% retail market share in Hungary, 38% in Slovakia, 3% in Romania and 2% in Czech Republic and will be strategically positioned to expand further into Austria and Southern Poland. Together, MOL and Slovnaft will also control some of the most complex refining assets in the region with a total combined capacity of 330,000 bbl/day. The Bratislava refinery, which has been recently upgraded with a US$ 530 million investment, is considered to be one of the most complex and modern refineries in the region. It has a capacity of 110,000 bbl/day and a Nelson complexity index of 9.9.
MOL and Slovnaft already have identified a number of areas for co-operation which they intend to develop and communicate to the investor community in due course. MOL expects the acquisition to be earnings neutral in 2000 and accretive from 2001.
J.P. Morgan has been mandated to provide a US$ 300 million 364-day bridge loan facility to enable MOL to complete the acquisition of existing and newly issued shares in Slovnaft. It is anticipated that this facility will be replaced by a term loan facility in due course. The indebtedness of the MOL Group is expected to stay within the publicly communicated 40% target even post-transaction.
János Csák, Chairman of the Board of Directors of MOL said "This alliance between Slovnaft and MOL will position us as the regional leader in the refining and marketing sector. This is the first transaction in the sector in Central and Eastern Europe where two companies are joining forces to optimise the way existing and future customers are supplied across the region. Together we are positioning ourselves in a promising growth market, and elevating efficiency improvement measures to a new level. We look forward to working closely together to share best practices and to co-ordinate our developments in this exciting high potential region thus increasing shareholder value for both companies. This transaction is a major step in our announced strategy and is a first in a series of initiatives that position MOL as a driving force in the future regional consolidation."
Slavomir Hatina, President and CEO of Slovnaft said "We are delighted to welcome MOL as our strategic partner in Slovnaft and look forward to working with János Csák and his team. We were looking for a strong strategic partner and selected MOL based on the close strategic fit, shared objectives in the region and the company`s vast experience in corporate transformation and efficiency improvement. The skills that they are expected to bring to our operations will enhance the prospects of Slovnaft to the benefit of our shareholders and employees alike and the extra financial strength that the new capital will bring us will provide added flexibility to our future development programmes."
J.P. Morgan also acted as exclusive international financial advisor to MOL, while Salomon Smith Barney acted as exclusive financial advisor to Slovnaft.