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Thursday, November 25, 2004

MOL buys Shell's Romanian filling stations

source: Reuters

Hungarian oil and gas firm MOL said on Tuesday it will buy Royal Dutch/Shell Group's Romanian fuel distribution business in a deal analysts valued at around $50 million.

The sale includes 59 gasoline filling stations and a smaller lubricants and aviation fuel business, enabling MOL to further expand its retail footprint in central Europe.

For Shell, the sale is the latest in a raft of disposals as the company presses ahead with a $10-12 billion divestment programme that will help fund increased oil and gas exploration.

Shell's Romanian liquefied petroleum gas (LPG) business is not included in the sale. This may be sold as part of the global LPG business of which Shell is also mulling a sale.

With the deal, MOL will have 130 filling stations in Romania, which gives it an 11 to 12 percent market share and makes it the second largest player in the country's fuel market after Petrom, MOL Communications Director Szabolcs Ferenc said.

Analysts said MOL had taken a big step toward meeting its targets. They said the company was known not to overpay.

"The rule of thumb is that each filling station costs $1 million, but I think they paid somewhat less, probably around $50 million for the whole thing," said K&H Equities analyst Peter Tordai.

At 1120 GMT, MOL stock was up 2.6 percent at 11,815 forints ($49.9).

Austria's OMV recently agreed to buy a 51 percent stake in Petrom for a reported 830 million euros ($1.1 billion).

GROWTH MARKET

Ferenc said MOL was ahead of its own target to increase market share. "We wanted 10 percent market share by the end of 2005, and this already puts us ahead."

Raiffeisen Bank analyst Kornel Sarkadi said MOL's best growth markets were Romania and the former Yugoslavia, which meant the deal was a good strategic fit.

"MOL knows perfectly well how much these assets are worth, and they are not known for overpaying," Sarkadi said.

K&H's Tordai pointed out, however, that MOL's returns on Romanian investments have been low and that MOL has yet to turn an annual profit on its Romanian operation.

"Whereas we calculate Hungarian retail margins around 10 euro cents, that's below 5 cents in Romania, so this acquisition is very much an issue about return on investments," Tordai said.

But Tordai added that with this move, MOL could acquire the critical mass in Romania that would allow it to significantly improve its efficiency indicators.

Ferenc noted that 10-month figures show the Romanian unit would turn an annual profit for 2004.

Posted by Mihai : 11/25/2004 01:13:00 pm