PKN Orlen and Grupa Lotos are planning to merge.
A letter of Intent was signed by Orlen with the Polish treasury, allowing it to take a majority 53 per cent stake in state-owned Lotos.
Marcin Jastrzebski, the chief executive officer of Lotos said, “Nobody who has an interest in capital markets and fuel companies has any doubt that such a merger is beneficial for both firms.”
Orlen operated 1758 fuel service stations in the country, as of September last year, while Lotos had 485. However, it is likely that Lotos will remain a separate brand on the market.
“If Orlen manages to take over Lotos at the current market price, it will be highly beneficial,” said Seweryn Masalski, fund manager at MM Prime TFI. “The combined concern will gain an even stronger position in the domestic market. it will be able to generate a lot of cost synergies.”
In order for the merger to get the green light from the Office of Competition and Consumer Protection (UOKiK), the terms will now have to be set out in detail and carefully worked out.
The merger is anticipated to make Orlen “a large European company. But this will have to be agreed by the UOKiK.
Marek Niechciał, president of UOKiK, remarked that because of the turnover of both companies, the Orlen-Lotos merger should be referred to the European Commission. The Commission may then decide to transfer the case back to UOKiK.
Investors started purchasing shares in both companies on the Warsaw Stock Exchange, following the announcement, causing Orlen’s shares to grow by 6 per cent, and those of Lotos by 6.4 per cent.
With regard to what will happen with the Lotos brand itself and its fuel service stations, everything depends on the final decisions of the Ministry of Energy and PKN Orlen, but the Lotos brand is to be retained. The position of the Lotos refinery in Pomerania will not be affected, but continue to operate.
An Orlen press release stated that the new entity will be strong regionally, but will continue to care for local communities. Currently, there were no plans for the consolidation of the brands. Integrated concerns have a stronger market position and can resist strong competitive pressure from international players and – the situation of significant cyclical fluctuations – stabilize fuel price. PWKD06032018
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