ECONOMY

OMV signs ‘historic’ Petrom buy

BUCHAREST (Reuters) – Romania yesterday signed a 1.5-billion-euro ($1.84 billion) deal to sell its biggest firm, oil company SNP Petrom, to Austria’s OMV, crucial for consolidating Central and Eastern Europe’s fuel sector. The sale, a key test of Romania’s willingness to give up strategic assets, is expected to boost the ex-communist country’s credibility abroad, bring credit ratings upgrades and help it join the European Union in 2007 as it hopes. OMV will pay 669 million euros for a 33.34 percent stake in Petrom and another 723 to 860 million to raise it to 51 percent, and will also take over Petrom’s 292 million euros foreign debt. «For us, this is a historic moment. We are privatizing the largest company in Romania,» said Economy Minister Dan Popescu, adding that the deal aims to boost much-needed economic growth in the Balkan country’s EU convergence drive. Officials said the deal put the total value of Petrom, which has two refineries, around 600 petrol stations and about 50 percent of the domestic fuels market, at 2.23 billion euros. «It’s a win-win situation for both the company and Romania,» Austria’s Economics Minister Martin Bartenstein said. Officials said OMV will invest at least 300 million euros a year in Petrom in the medium term, adding that its acquisition puts OMV’s daily production target at 350,000 barrels by 2008. «Petrom is a unique opportunity… its acquisition doubles OMV’s 2008 production target,» OMV’s chief executive Wolfgang Ruttenstorfer told a news conference. He said OMV would pay for the deal with a mix of cash and debt, but was also considering a capital increase later. «A later capital increase at OMV is an open question. I do not rule it out. It is also possible we could utilize an exchangeable bond,» he told a conference call with Vienna reporters. «The sale will lead to a fall in arrears and reduce the state’s role in the economy,» ABN Amro senior analyst Radu Craciun said. Petrom and OMV agreed on a cut in the number of employees from 57,000 at present, but officials disclosed no figure.