State refiner to absorb Latsis group’s company,
giving it 25 pct
Hellenic Petroleum (ELPE), the state owned oil refiner, is to merge with Petrola, owned by the private Latsis group, the government and Petrola announced last Friday, May 30th.
The state will sell a 16.65 percent stake (or 43,500,000 shares) in ELPE to Paneuropean Oil and Industrial Holdings S.A, which owns Petrola, for 7.50 euros a share, or a total of 326 million euros. This is a 29.3 percent premium on ELPE’s closing price yesterday and 41.5 percent on the past six month’s average. ELPE and Petrola will immediately begin to merge, on the basis of one share in ELPE being equal to 5.36 in Petrola. “It is expected that when the merger is complete, the Latsis group will hold about 25 percent of Hellenic Petroleum,” the ministries on national economy and development said in a joint statement. The company’s board will increase from the current 11 to 13 members, with the state appointing seven. Paneuropean, employees and minority shareholders will have the right to appoint two members each.
“The agreement between the state and the investor foresees that thw state will maintain control of ELPE’s management over the next years. Furthermore, the investor and state have a mutual right of preference in certain cases of share distribution outside of public listing or book building to institutional investors,” Petrola said. ‘The size of the company that will result from the merger will significantly strengthen its potential for further development of its international activities,” it said. ELPE employees promised to take action to stop the merger.
The resulting company will have a total turnover of 3.905 billion euros and pretax profits of 134 million euros, with assets of 1.613 billion euros on the basis of 2002 figures. It will control nearly 80 percent of the market, as ELPE holds 58 percent and Petrola 20 percent.
The announcement caused a storm over the weekend, with the opposition New Democracy party claiming that instead of privatizing one company it was nationalizing another.
Vardis Vardinoyiannis, chairman of Motor Oil, which controls 22 percent of the Greek oil refining market, demanded: “Do we or do we not have a government? A monopoly is being created and this should concern the opposition as well.”
In February, Greece canceled an effort to sell 23.5 percent of ELPE to the Latsis group and Russia’s Lukoil.
The proposed merger between Hellenic Petroleum and Petrola creates a giant refiner that will dominate the Greek market. It remains to be seen, however, whether the firm will remain under state tutelage and what the effect on competition will be in a market with only one other competitor (Motor Oil).
The Hellenic Petroleum Group, the larger of the two companies, was founded in 1971 as the State Petroleum Corporation (DEP). Until 1998, it was completely controlled by the State. During that period, it expanded into several sectors of the petroleum industry, either through acquisitions (its refineries) or by setting up subsidiaries.
Before it was listed on the Athens Stock Exchange, DEP absorbed subsidiaries DEP-EKY (a hydrocarbons exploration company), ELDA (the Aspropyrgos refinery, west of Athens) and EKO (a Salonica refinerie, chemicals and gasoline stations Network) and was renamed Hellenic Petroleum (ELPE). It floated 23 percent of its shares in 1998 on the Athens and London exchanges.
The state floated a second tranche of ELPE’s shares in 2000. The following year, it called for a tender for a “strategic investor” that would acquire up to 23 percent of the company. Petrola, along with Lukoil, Russia’s largest oil company, expressed an interest but the prolonged negotiations ultimately failed. Petrola had announced it retained an interest in a partnership with ELPE; still, Friaday announcement took most people by surprise.
ELPE owns three refineries, in Aspropyrgos, Thessaloniki and Skopje, in the Former Yugoslav Republic of Macedonia (FYROM), 1,441 gasoline stations, in Greece, FYROM, Albania and Georgia, and exclusive exploration rights in a 62,000-square-kilometer area in Greece. It is also actove in petrochemicals, research and technical studies.
ELPE is quite active abroad: It has a 63 percent stake in ELPET-Valkaniki SA, which, in turn, owns 69 percent of the OKTA refinery in FYROM; through another subsidiary, Global SA, it controls 100 percent of commercial company Elda Petroleum Albania. Through EKO-ELDA, the refinery subsidiary, it controls 76.5 percent in EKO-Georgia Ltd. ELPE also takes part in consortia active in North Africa and the Middle East.
ELPE employs 4,500, people of whom 1,200 work abroad. Consolidated pretax profits in 2002 was 133.7 million euros, up from 75.8 million in 2001.
Petrola Hellas was founded in 1969 by shipping tycoon Yiannis Latsis. Its refinery in Elefsina, west of Athens, has the biggest storage facilities in Greece and the refining capacity of 5 million metric tons per annum, 25 percent of the Greek market’s total capacity. It employs 550 people and its stock has been listed on the Athens Stock Exchange since 2001.
Petrola has a 20 percent market share in sales or refined oil products and a 36 percent share in fuel supplies to ships and aircraft. In 2000, it accounted for 29 percent of all oil product exports from Greece. Petrola showed a profit of 28.1 million euros in 2002, a 368 percent increase from 2001, despite the fact that turnover fell 5.8 percent, to 1.125 billion euros.