Wednesday, November 25, 2020
Home Finance PKN ORLEN determined to proceed with the acquisition of LOTOS Group

PKN ORLEN determined to proceed with the acquisition of LOTOS Group

The European Commission issued a written Statement of Objections to Poland’s biggest refinery PKN ORLEN regarding the potential acquisition of LOTOS Group. 

“We are determined to carry out the acquisition of LOTOS Group,” said Daniel Obajtek, President of the PKN ORLEN Management Board. “What the current situation on the fuel and energy market clearly goes to show is that companies must diversify business models to increase their resilience to macroeconomic turbulence and geopolitical factors.”

Therefore, Mr Obajtek believes that PNK ORLEN’s acquisition of the LOTOS Group is a reasonable business move as, in the long term, the transaction would strengthen both companies, ensuring their continued operation and competitive position on international markets, while also enhancing Poland’s energy security.

“The objections issued by the European Commission have come as no surprise to us,” he commented. “They are only natural in more complex cases such as our intended merger with the LOTOS Group. It is for the first time that the Commission has presented its objections so extensively, in written form. We will thoroughly analyse and respond to them, while formally proposing our remedial measures. We are confident they will dispel the Commission’s concerns.”

The acquisition of the LOTOS Group by PKN ORLEN was initiated in February 2018 by signing a letter of intent with the State Treasury, holding 53.19 per cent of voting rights at the General Meeting of LOTOS Group. In July 2019, PKN ORLEN filed a formal application for the European Commission’s approval of the concentration.

The merger with LOTOS Group is intended as an important step towards building a strong multi-utility group with international potential, successfully competing across markets. The merger would strengthen its participants’ bargaining power in price negotiations with trade partners in the US, the Middle East or Russia while facilitating the establishment of new business relationships. The transaction would play a major role in ensuring the fuel and energy security for Poland and for entire Central and Eastern Europe.

It would also increase the combined group’s ability to finance large, multi-billion projects, which would drive forward Poland’s economy with added benefits for the environment (such as the proposed offshore wind farm project). The merger would also give both companies opportunities to diversify into new business areas and expand their existing business lines even faster. A case in point for the LOTOS Group would be electric mobility.

According to PKN ORLEN, in other European countries, the fuel industry consolidation happened a long time ago, which includes MOL in Hungary, Statoil and the surviving Equinor in Norway, Repsol in Spain, Galp Energia in Portugal, Eni in Italy, OMV in Austria, and TOTAL in France. While not distorting market competition, the mergers of industry leaders in those countries drove positive changes. Likewise, the consolidation process in Poland would in no way distort competition in fuels or logistics, which is guaranteed by the European Union’s antimonopoly law.

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