EU opens antitrust investigation into PKN’s bid for rival Lotos

The Delta Kanaris tanker (R) enters the Naftoport in Gdansk, Poland, 13 April 2018. The tanker, transporting Iranian crude oil for Polish company PKN Orlen, arrived at the Baltic seaport of Gdansk. [EPA-EFE/DOMINIK KULASZEWICZ]

Polish oil refiner PKN Orlen’s bid for rival Lotos may reduce competition in Poland and neighbouring countries and push up prices, EU antitrust regulators said on Wednesday (7 August) as they opened a full-scale investigation.

State-run PKN wants to buy at least 53% of Lotos, in which the government holds a 53.19% stake. 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 may lead to higher prices and curb competition, confirming a Reuters report on 4 July.

In the wholesale supply of fuels, the combined company would be a quasi-monopoly facing limited competition from imports, the EU antitrust enforcer said.

It said in the retail market, the merged company would be four times bigger than the next rival, while airports would have only one jet fuel supplier.

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

The regulator also expressed concerns about downstream rivals being shut out of the market, because of the volumes of fuels held by both the companies. It set a 13 December deadline for its decision.

Rival BP Plc, with 550 petrol stations in Poland versus PKN’s 1,783 and Lotos’ 493, has voiced its concerns about the deal.

PKN said it was not surprised with the regulator’s decision.

“We have to do with a complicated process … we hope that thanks to constructive cooperation we will finalise our works this year,” PKN Chief Executive Officer Daniel Obajtek said.

PKN, which has a market capitalisation of almost 40 billion zlotys, had planned to complete the Lotos takeover by the end of this year.

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