After failed takeover in Hungary, OMV again up to something? (2)

http://www.portfolio.hu/en/cikkek.td...

Tuesday, 21, April 2009 02:07:00 PM

In contrast with earlier plans for a EUR 750 billion bond issue, Austrian oil company OMV is now gearing up for a EUR 1 billion issue next week. In addition, the company is seeking shareholder approval of a EUR 2 billion convertible bond issue. Following the failed MOL acquisition, OMV's efforts to line up new capital on such a high scale suggest that another acquisition story in the making.

Meanwhile, OMV is seeking to raise additional funds by issuing 77.9 million convertible bonds, generating EUR 1.9 billion at the current share price.

OMV is presumably gearing up for a major acquisition - at least the bond issues strongly indicate this possibility. Available financial resources total approximately EUR 5.8 billion, including funds from the bond issues, compounded with those released by the sale of MOL shares, plus free credit available to OMV from commercial banks:

- 5-year bonds: EUR 1 billion
- Convertible bonds: EUR 1.9 billion
- MOL divestment: EUR 1.4 billion
- Free credit: EUR 1.5 billion

OMV's 2009 refinancing requirement is approximately EUR 600 million. Even if this is taken into consideration, the company still has approximately EUR 5.2 billion available for a potential new acquisition, assuming cash flow is sufficient to cover 2009 capex.

In Portfolio.hu's view, the following may be potential acqisition targets for OMV:

1. A Russian upstream deal, possibly as part of the MOL tranaction. OMV sold its stake in MOL to Surgutneftegaz for more than twice the share price in the market, which has led many market players to consider the possibility that the company may compensate Surgut for the high price in the subsequent purchase of a natural gas field in Russia. (The rationale behind this assumption is that a positive market response to the sale of MOL stocks may have been important to OMV after the extensive criticism the management has received for the investment.

2. Construction of a refinery in Turkey in cooperation with Petrol Ofisi. However, this project has not yet been granted approval, therefore it has not yet reached a phase in which funding might be required.

3. Increase of OMV's 42% stake in Petrol Ofisi, an alleged plan widely rumored in recent years but denied by both OMV and majority shareholder Dogan Holding. However, at the current share price the acquisition of 100% of Petrol Ofisi shares would require only EUR 650 million funding.