MOL: Hungary publishes draft low on buying strategic firms

Hungary's government has published a draft law that would modify the conditions for buying firms of strategic importance for the country, it said in a statement on Friday. The key elements of the new regulation are the following:

1) The new law would introduce the category of strategic importance companies and for these companies the approval of their general meeting would be required for a valid public bid.
2) The current regulation prohibits buying own shares or lifting capital for listed companies under a public bid process. The new law would allow strategic companies to defend themselves with buying own shares/raise capital if they have the approval for this from their owners.
3) Another new element of the regulation is a public bid can be repeated only after six months.

Our view: The government said in July it would propose new legislation to stop state-owned foreign companies buying strategic assets, which would also help resist a takeover of MOL (26 490 HUF, -1,16%) by OMV (46 EUR, 0,00%). It now seems that the new law does not refer to foreign government controlled companies as the Hungarian government did not want to be target of criticism inside the Union. Instead of this, they simply try to make a takeover more difficult in the strategic sectors. This regulation is softer than we have originally expected, but enough to defend MOL from OMV. We do not see major market reaction to the news as we see the takeover premium has already been eliminated from MOL share price.