ELPE, Petrola merger seems to meet objectives of both sides

The collapse of the previous effort to sell a stake in state refiner Hellenic Petroleum (ELPE), despite the headache that this caused the government and the Latsis group (and which was attributed to the «arrogant and absurd» demands of Petrola’s Russian partner in the bid, Lukoil), in the end opened the way to a mutually acceptable solution on the basis of what was termed the «Greek proposal.» Following Friday’s deal, the State’s stake in Hellenic Petroleum is now reduced and the Latsis group, which had never hidden its intentions, has now achieved one of its basic objectives. Latsis’s Petrola, the third largest refiner in Greece, was the vehicle for the group to strengthen its presence in the domestic market and prepare for moves into the broader regional market. National Economy Minister Nikos Christodoulakis, who was in favor of a sale of part of Hellenic Petroleum, and Development Minister Akis Tsochadzopoulos, who was against it, made the announcement of the deal together on Friday. They stressed that the agreement between the State and Paneuropean Oil and Industrial Holdings SA (Petrola’s owner) leads to further privatization and to a business partnership for Hellenic Petroleum. The sale of 16.65 percent of Hellenic Petroleum to Paneuropean does lead to a reduction of the state-controlled stake in the company, but the State will keep the majority on the board and, according to the deal, will control management for five years – as long as it maintains its majority stake. The Latsis group immediately gains 16.65 percent, which will rise to 25.35 percent in exchange for Petrola which will be merged with ELPE. In other words, the Latsis group now becomes the largest private investor in the largest energy business in the country. And this is its great gain. And also why the fears of ELPE employees are not completely unfounded when they express surprise at the decision and the concern that the Latsis group may soon gain control of the management as well. It is a logical step to consider: Who would hand over his own company as well as 326 million euros in cash and leave the company in which he now owns 25.35 percent in the hands of state-appointed management? Obviously, for reasons of political and other expediency – as well as to keep the peace with employees to the greatest extent possible at this difficult time for the government – the government’s promise that it will maintain control of management for five years, appointing seven of the board’s 13 members, eases workers’ fears, but will not eliminate them.

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