Croatian press reports that MOL plans to make investments of EUR 500m-1,000m at the two refineries of INA. Report adds that MOL plans to propose to the Croatian state, INA's majority owner, a capital raise at the company, which would increase MOL's stake. According to press IPO of INA's shares on the Zagreb Stock Exchange is likely in September or October.
The investment MOL plans at the Sisak and Rijeka refineries is well know. MOL originally communicated that INA plans to do it from its own cash-flow, however, even earlier we had doubts about this as regulated fuels and gas markets in Croatia keeps INA's margins under pressure.
In our view, MOL, seeing no progress with its acquisition in the past three years, tries to convince Croatian government that INA would not be able to finance this development program alone. Since government is very unlikely to take part in a capital increase, this would allow MOL to increase its stake in the company.
With the approaching IPO, news on INA could have increasing influence on MOL's share price. In our view, market reaction should be positive is MOL could get a majority in the company at price which does not value INA to more than US$ 3.5-4.0bn. Please also note, that planned energy market liberalization steps of the Croatian government have a large impact on INA's valuation.