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. Last Updated: 07/27/2016

Hungarian Worry Mounts Over Surgut's Intensions

Hungarian President Laszlo Solyom is "worried" about the way Surgutneftegaz acquired a stake in MOL and the potential consequences of the deal, the president's office said Wednesday after Solyom met the Hungarian oil refiner's CEO, Zsolt Hernadi.

MOL needs "reasonable mechanisms against creeping control," the company said in proposals to shareholders on the web site of Budapest's stock exchange late Tuesday. These include a stipulation that only one board member be dismissed at a time from the current 13. MOL will also skip a dividend payment to maintain "financial flexibility."

Eastern and Central European countries, already dependent on Russia for crude supplies, have been wary of allowing their refining industries to also be controlled by Russian companies. Surgut last week purchased Austrian OMV's 21.2 percent in MOL, which the Budapest-based company said was an "unfriendly" move that happened without prior consultation.

Surgut said at the time that it intended to use the stake to help it expand in Europe. Hours later, MOL said it was not interested in a partnership.

The Hungarian Foreign Ministry on Tuesday summoned Russia's ambassador to Budapest to discuss Surgut's acquisition and Russia's failure to notify the Hungarian government before the transaction, ministry spokesman Lajos Szelestey said, MTI news wire reported.

MOL shareholders will meet April 23 to vote on the proposals. Management has also suggested a three-quarters majority be needed to dismiss board members. A further rule change would oblige shareholders to "immediately identify the ultimate beneficial owner" of their stake upon request or face suspension of voting rights.

Hungary's financial regulator has started an investigation at MOL's request to determine whether Surgut broke capital market regulations with its transaction.

(Bloomberg, MT)