The EU initiates antitrust proceedings regarding PKN’s offer for Lotos

Author: Foo Yun Chee

BRUSSELS (Reuters) – Offer Polish oil refinery PKN Orlen to the competitive Lotos could limit competition in Poland and neighboring countries and raise prices, EU antitrust regulators said on Wednesday, opening a full-scale investigation.

State-owned PKN wants to buy at least 53% of Lotos, in which the government holds 53.19% of shares. The companies own the only two refineries in Poland and are also present in the Czech Republic, Estonia, Latvia, Lithuania and Slovakia.

The European Commission said the deal could lead to higher prices and less competition, confirming a July 4 Reuters report.

In wholesale fuel supplies, the combined company would be a quasi-monopoly facing limited competition from imports, the EU’s competition law enforcement body said.

It said that in the retail market, the combined company would be four times the size of its next rival, while airports would have just one supplier of jet fuel.

The transaction would also eliminate PKN’s only competitor in the supply of asphalt to the Czech Republic, Estonia, Latvia, Lithuania and Slovakia. The combined company would have a dominant share in the provision of mandatory storage facilities in Poland.

The regulator also expressed concerns that downstream rivals would be priced out of the market due to the fuel volumes held by both companies. She set a deadline of December 13 for making a decision.

Rival BP Plc having 550 gas stations in Poland compared to 1,783 PKN and 493 Lotos stations, expressed his concerns about the transaction.

PKN stated that it was not surprised by the regulator’s decision.

“We are dealing with a complicated process… We hope that thanks to constructive cooperation, we will be able to finalize the work this year,” said Daniel Obajtek, CEO of PKN.

PKN, which has a market capitalization of almost PLN 40 billion, planned to finalize the acquisition of Lotos by the end of this year.

(Reporting by Foo Yun Chee; Additional reporting by Agnieszka Barteczo in Warsaw; Editing by Francesco Guarascio, Jane Merriman and Shounak Dasgupta)