OMV signs Euro1.45bn deal to buy 51% of Romania's Petrom

Source: ICIS News

2004/07/23

LONDON (CNI)--Austrian oil group OMV on Friday signed the agreement to acquire a majority stake in Romanian state-owned oil and chemicals group Petrom for Euro1.39bn-1.52bn ($1.73bn-1.90bn).

Terms for the sale of a 51% stake were approved by the Romanian government earlier this month, following exclusive negotiations that commenced in May.

OMV will pay the Romanian privatisation agency Euro669m for an initial 33.34% stake in Petrom. This stake will be raised to 51% through a share capital increase of between Euro723m and Euro855m, subject to the take up of minority rights and potential exercise of an option by the European Bank for Reconstruction and Development (EBRD) to buy a 5% stake.

This capital will flow directly into Petrom and will be available for future investment in the business, said OMV.

The Austrian firm will also assume Petrom’s external debts of about Euro292m.

The acquisition will be financed initially through a combination of cash and committed undrawn facilities, said OMV.

OMV said Gheorghe Constantinescu will continue as chief executive of Petrom. The Petrom board of directors (equivalent to the supervisory board) will continue to have seven members, four of whom will be from OMV. The Petrom managing committee will also include four OMV representatives as well as local management.

Wolfgang Ruttenstorfer, chief executive of OMV, commented: “Today, OMV seizes the biggest opportunity for consolidation in Central and Eastern Europe. For Petrom this transaction offers the opportunity to be a decisive hub for the region both in exploration and production (E&P) as well as refining and marketing (R&M).”

Romanian Prime Minister Adrian Nastase said: “We are very glad that the contract has been concluded and we are sure that working together with our Austrian partner Petrom will soon become an important player on the oil and gas E&P market in the Balkan area.”

Petrom has estimated oil and gas reserves of about 1bn barrels of oil equivalent (boe), a daily production of 220 000 boe, a refining capacity of 8m tonne/year and 600 filling stations.

The Romanian company also owns two petrochemical plants - Arpechim Pitesti and Petrobrazi Ploiesti - plus fertiliser producer Doljchim Craiova. Petrom has the capacity to produce 170 000 tonne/year of ethylene, 90 000 tonne/year of polyethylene (PE), 62 000 tonne/year of ammonia, 50 000 tonne/year of urea and 72 000 tonne/year of methanol.

OMV said Petrom’s oil and gas reserves will add significantly to its global proven reserves of 410m boe in 2003.

In E&P, Petrom adds about 220 000 boe/day to OMV’s 2004 target of 120 000 boe/day. This enables OMV immediately to more than double its targeted production of 160 000 boe/day for 2008.

In R&M, OMV will move significantly closer to its targeted market share of 20% in Central Europe set for 2008. Through the acquisition, the company's overall market share in the region increases immediately from 13% to 18%, said OMV.

With the addition of Petrom, OMV’s total refining capacity will be boosted from 18.4m tonne/year to 26.4m tonne/year.

With the acquisition of the biggest filling station network in Romania, OMV’s overall network will be expanded from 1782 stations to 2382. OMV’s market share in retail and commercial in Romania will increase from 6% to more than 30% and in the overall Danube region from 13% to 18%.

The Petrom privatisation is one of the conditions set by the European Union (EU) for awarding Romania "functioning market economy'' status, which is expected later this year. The award of this status is needed for Romania to qualify for EU membership in 2007.

Closing of the deal and payment of the purchase price are expected to take place in the fourth quarter of 2004, said OMV.

(Marian Chiriac in Bucharest contributed to this story.)