Orban Urges Croatia to Buy Back Mol Stake to Settle Row

Croatia should consider buying back Mol Nyrt.’s stake in Zagreb-based refiner INA Industrija Nafte d.d. to settle a dispute the government has with the Hungarian oil company, Hungarian Prime Minister Viktor Orban said.

Croatia is applying “non-economic” methods to intimidate Mol, Orban said in a state radio interview today, referring to the arrest warrant Croatia issued this week for Mol Chairman Zsolt Hernadi as it probes his company’s 2009 acquisition of a controlling stake in the $7.3 billion unit.

“We recommend to the Croatians that they consider -- just like we usually do in Hungary -- to take these shares into state hands and to settle” on the price “in a fair way,” Orban said. “But there’s no need to arrest anyone.”

The Adriatic country is investigating the contract that gave Mol management control over INA after a Zagreb court ruled former Premier Ivo Sanader received a bribe from Mol in the 2009 deal and sentenced him to a 10 years in prison. Sanader is appealing. Mol has denied any wrongdoing.

Mol shares dropped 2.1 percent to 15,090 forint by 2:49 p.m. in Budapest, extending its decline to 5.7 percent in the past three days and heading for its lowest close in 16 months. Mol owns 49.1 percent of INA. Croatia, which complains Mol runs INA as a subsidiary rather than an independent company, holds 44.84 percent.

National Interests

Croatian Premier Zoran Milanovic, who said his government can’t negotiate over the arrest warrant, suggested the country may also not be willing to “gamble with state finances” by repurchasing INA shares.

“We have to protect national interests, but in such a way that we don’t enter unpredictable financial arrangements and harm the budget,” he said today during a visit to neighboring Bosnia-Herzegovina.

Though Croatia has a right of first refusal for the shares should Mol decide to sell, the government needs to see the conditions, Milanovic said. He also said that there are “other potential investors,” without elaborating.

Mol has said it won’t grant Croatia the right of first refusal on its INA stake as it considers the government to have broken their agreement. Croatia has said Mol violated the accord.

“We will see what kind of relations they are ready to form with us,” he said of any new non-state buyer. “Whoever wants to come to Croatia, must be ready for a partnership.”

Government Influence

Orban’s statement suggests Hungary’s government, which has almost a 25 percent stake in Mol, “has influence on Mol’s strategy,” which may result in a “discount in Mol’s valuation justs like in the case of many Russian oil and gas companies,” Peter Szentirmai, a Budapest-based analyst at KBC Securities, said in an e-mail today.

This may also impact the price Mol can get for INA as a “state-ordered decision doesn’t bode well, even if selling the stake would be the economically reasonable step from Mol,” Szentirmai said.

Mol, Hungary’s largest refiner, yesterday said it would consider selling its stake in the $7.3 billion Croatian oil company, a day after Orban’s government said it should review this option.

Orban also said that besides Hernadi’s arrest warrant, there were “four-five” other ongoing cases in which the “Hungarian economic elite’s most high-profile people are affected.” He didn’t specify the cases or who were affected.

“The way we see it is that Croatia is using non-economic methods” to pressure Mol, “which don’t justify us staying on the Croatian energy market,” Orban said.

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