The prime ministers of Croatia and Hungary agreed on Saturday to support a share swap of (19 500 HUF, -2,69%) and INA, which should be finalized later this year. The rest is up to the owners and the management, Croatian government spokesman told Reuters.
We consider the news as positive for from strategic perspective, but see no price reaction to that until the exchange ratio is set. While the willingness of the Croatian government to sell 14% INA shares to was well known on the market, the news also confirms earlier press speculation that Croatian government can accept shares as a payment. We suspect Croatia will likely set conditions to this deal including limitations what can do with INA. Based on our fair value estimates 2.25 shares equals to one INA share. (MOL fair equity value of US$ 19.7bn implies fair share price of HUF 26,830 while INA’s fair equity value of US$ 4.0bn implies a fair share price of HRK 1,848.) Based on synergies can utilize from acquiring INA, we can imagine the final share swap ratio will fall to the 2.5-3.5 range, definitely lower than 4.2, the current market valuation of the two companies implies.