PKN Orlen only bidder for Unipetrol

By making a good offer for Unipetrol, Polish oil company PKN Orlen has likely paved the way for a completion of the sale, despite turning out the only bidder for the Czech state-owned petrochemicals company, a Czech official said.
"Even though it isn't ideal that there was only one bidder left in the tender, the price (PKN Orlen) offered is an acceptable one," said Pavel Kuta, the deputy chairman of the government-run National Property Fund, or FNM.

PKN Orlen said it would pay 13.05 bn koruna ($ 1 = CZK 27.3) for the government's 63 % stake in Unipetrol and debts the Czech company owes to the state. The Polish company remained the sole contender after Shell and Hungarian oil and gas company MOL, the two other two finalists, pulled out of the tender. The FNM-run commission on the Unipetrol privatisation will make its recommendation on the PKN Orlen's bid to the government, Kuta said.
As the competitive pressure withers after the pool of suitors for Unipetrol dries down to PKN Orlen only, local market participants eagerly await whether the government accepts the Polish company's offer. A successful consummation of the Unipetrol deal would help the cash-strapped Czech government to replenish its tight budget and improve the privatisation track record after a series of failures, including the cancellation of the previous attempt to sell Unipetrol in 2002, some market observers say.

Kuta said that the sum of CZK 11.3 offered by PKN Orlen for the Unipetrol's equity is within the valuation range made by the government's advisers on the sale. However, he declined to say what the range was.
"The offered price is 1.5 times of the actual book value of Unipetrol," said Robert Hessenberger, the head of the Czech branch of investment bank WestLB, a member of consortium, also including McKinsey & Co. and Czech financial company EEIP, that is advising the Czech government on the Unipetrol sale. A source familiar with the situation at Unipetrol and the Czech government said the government would likelygo ahead with the sale, despite receiving a single bid.
"The government doesn't need another failure to sell Unipetrol," the person told. "It is better to move ahead with the sale rather than spend some minimum of 18 months to prepare another tender."

The price offered for the Unipetrol's equity by PKN Orlen, amounting to about EUR 350, is slightly below EUR 361 mm offered by Czech chemical company Agrofert Holding for Unipetrol in 2002, before the government cancelled the transaction after Agrofert failed to pay.
"The current offer is relatively similar to the figure offered two years ago and one has to take into account that the Unipetrol didn't do well financially last year," Kuta said.

Weighed down by losses at its PVC maker Spolana and gas station chain Benzina subsidiaries, Unipetrol's consolidated net profit dropped 76.7 % on the year to CZK148 mm in 2003. According to Kuta, the price offered by PKN Orlen is good even after the government eliminated cash-rich ex-Soviet Union companies from the original list bidders.
The three short-listed companies were selected in late January from a larger list, including Kazakhstan's oil and natural gas national company KazMunaiGaz, Russian oil producer Tatneft and privately held Slovak-Czech investment company Penta.
"The competitive pressure was smaller after the shortening of the list of bidders," Kuta said.

Acquisition of Unipetrol would be PKN Orlen's second major foreign expansion in little more than a year. In February 2003, the company completed a purchase of 494 gas stations from BP in northern Germany. The move would extend PKN Orlen's reach in Central Europe and shore up its market position in southern Poland, where MOL's Slovakian subsidiary Slovnaft has been making inroads.
Potentially, acquiring Unipetrol could also strengthen PKN Orlen's hand in merger negotiations with MOL, which appear to have stalled just days before a preliminary letter of intent to explore the deal.

PKN Orlen bid alone for Unipetrol, but it has agreements in place with Agrofert and US giant ConocoPhillips to divide up the Czech holding's diverse assets -- which range from crude oil refining and retail fuel distribution to specialized petrochemical operations. Agrofert is already a minority shareholder in Unipetrol's fertilizer producers Lovochemie and Aliachem.
ConocoPhillips is a minority owner of Unipetrol's largest asset, oil refiner Ceska Rafinerska, which is 49 %-owned by the International Oil Consortium of Shell Overseas Investments, Italy's Agip of ENI International and ConocoPhillips.