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. Last Updated: 07/27/2016

Gazprom Moves In On Hungarian Firm

BUDAPEST, Hungary — Gas monopoly Gazprom on Thursday moved closer to owning Hungary's second-largest chemicals firm when a corporate ally, Austria's CE Oil and Gas, made a public offer worth about $190 million for BorsodChem.

CE Oil and Gas Beteilung und Verwaltung AG, wholly owned by VCP Vienna Capital Partners AG, said BorsodChem's board had unanimously recommended its 5,300 forint ($18.31) per share offer, which opens July 1 and closes Aug. 26.

The bid comes just a day after Russian petrochemicals firm Sibur, controlled by Gazprom, acquired almost 25 percent of BorsodChem and adds a new twist to a long-running battle for control of the Hungarian chemicals group.

Gazprom, which controls a quarter of the world's natural gas reserves and is 38 percent owned by the Russian government, has long been vying with oil and gas group MOL for leadership in the Hungarian chemicals sector.

Earlier this year investors closely linked to Gazprom took control of BorsodChem by means of increased stakes, options on stakes and board seats.

Gazprom, which recently had a change in management, is not known to hold any direct stake in BorsodChem.

CE currently holds 16.1 percent of BorsodChem, and Sibur on Wednesday exercised an option to buy a stake from CIB Bank, the Hungarian arm of Italy's IntesaBci group. Together, CE and Sibur have 40.9 percent.

CE is bidding for the outstanding 10,230,865 shares, or 83.9 percent of BorsodChem. Its bid values BorsodChem at 64.6 billion Hungarian forints ($222.9 million), and analysts say the price undervalues a company that had first-quarter sales of 31.72 billion forints and operating profit of 3.05 billion forints.

The offer price is 2.9 percent higher than the 90-day average Budapest Stock Exchange share price and 5.89 percent higher than the 5,005 forint closing price June 13.

Analysts said that Sibur, which already sells raw materials to BorsodChem and helps sell the firm's products in Russia, would be the ultimate holding vehicle for all the BorsodChem shares CE acquires.

BorsodChem chief executive Laszlo Kovacs said that cooperation between BorsodChem and Sibur would intensify in the next few years.

"To me it seems that there is [a link between CE Oil and Sibur] and there will not be a counteroffer from Sibur," said Tamas Pletser at Erste Bank Investment. "It's possible that they will sell their stake to Sibur later."

Attila Vago at Concorde said the final destination of the BorsodChem shares would probably be Sibur in two years' time.

"It cannot be excluded that CE is collecting all BorsodChem shares, and … finally the BorsodChem package would land at Sibur," said Karoly Schweininger at Nemet Investment Rt.