LUKoil wins bid for Beopetrol

Aug 26, 2003 02:00 AM

by Marta Srnic and Vladimir Todres

LUKoil will spend EUR 207 mm ($ 226 mm) to buy a majority stake in Serbia's Beopetrol, the company's first successful bid for a European oil company since 1999. LUKoil will pay the Serbian government EUR 117 mm in cash for 79.5 % of Beopetrol, Serbia's No. 2 fuel retailer, and will invest the rest later, the tender commission said. Beopetrol has 179 filling stations.
LUKoil beat out Hungary's MOL, which offered about EUR 190 mm in cash and investments. LUKoil, which has 900 filling stations in Eastern Europe and the former Soviet Union, is looking to boost profit margins by selling more refined products directly to car owners.

After taking over Romanian and Bulgarian refiners in 1999, LUKoil failed in attempts to buy oil companies in Croatia, the Czech Republic, Greece, Lithuania, Montenegro and Poland.
"It's a psychologically important victory. The pause in LUKoil's foreign takeovers has become too long," said Valery Nesterov, an analyst at Troika Dialog in Moscow. LUKoil and Budapest-based MOL are competing with Austria's OMV and Poland's PKN Orlen to expand in former communist countries in Eastern Europe, where economic growth is expected to accelerate when eight of the region's countries join the European Union next year.

The Russian company will have to import crude oil for refining in Serbia as the government will not let it sell oil products refined elsewhere in Serbia, said Aleksandar Vlahovic, Serbia's minister for state asset sales.
"The privatisation of Beopetrol produced results that are above expectations considering the estimated value of capital that the agency had as a benchmark," Vlahovic said.
Moscow-based LUKoil last year lost its rank as Russia's No. 1 crude oil producer to Yukos. The company's sales exceed those of Yukos and LUKoil does more business outside the country than any Russian oil company.

"The cash payment looks reasonable," said Steven Dashevsky, head of research at Aton Capital Markets in Moscow. "Later, LUKoil will be investing in its own business. The Serbian fuel market is close to LUKoil's main non-Russian refinery in Bulgaria."
LUKoil spokesman Mikhail Mikhailov said the company will not comment until it receives official notification from Serbia. MOL had sought to add Beopetrol's filling stations to extend its expansion in east Europe. The Hungarian company spent more than $ 1.1 bn in the past three years to buy refiners in Slovakia and Croatia and gas stations in Romania. The company will now probably start building a network in Serbia, analysts said.

LUKoil has refineries in Russia, Ukraine, Romania and Bulgaria. It failed this year in bids for a majority stake in Rafineria Gdanska, Poland's No. 2 refiner, and for a minority stake in Hellenic Petroleum, Greece's largest refiner. Serbia's tender commission will have one month to conclude exclusive talks with LUKoil.
The company pledged to invest EUR 85 mm in Beopetrol's business over the next five years and spend EUR 5 mm on social programs,the commission said. MOL offered EUR 101 mm in cash, EUR 84 mm in investment and EUR 5 mm in social programs. Serbia was advised by BNP Paribas, France's biggest lender by assets.

Source: Bloomberg
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