PKN Orlen has become the front runner in talks on buying the 54% stake in Lithuanian refinery Mazeikiu Nafta from Yukos, according to a Lithuanian official’s statement. PKN Orlen is said to be offering USD 1.5bn for the stake, which values the entire company at USD 2.8bn, while Kazmunaigaz has offered USD 1.2 bn and Russian oil conglomerates offered below USD 1.0bn. As the deadline for final offers approaches on January 27, it seems that PKN Orlen will win the tender. We judge PKN Orlen's offer as excessive, as we estimate the reasonable price for Mazeikiu at USD 2.3bn, based on a processing capacity comparison with Polish refineries (Gdansk, Plock). Despite the fact that the Mazeikiu acquisition opens great potential synergies, we think that the stock impact could be negative. Moreover, in the case of PKN Orlen eventually wins the tender, we expect next year's dividend to be lower. Nonetheless, until a final decision is made and we find out the actual price for Mazeikiu, we reiterate our Buy rating on the stock, with fair value estimate at PLN 69 per share.