The 13-day-old proposed merger of Austrian oil firm OMV and hydropower generator Verbund has been dropped, for now, due to political resistance, Austria’s economy minister said May 23.
“We came to the conclusion that … politically, the conditions did not exist, and will therefore not pursue the project further … in this parliament,” Economy Minister Martin Bartenstein said at a joint news conference with Finance Minister Karl-Heinz Grasser.
OMV and Verbund were not immediately available for comment.
OMV’s takeover of Verbund, which would have been the biggest such deal in Austria, was touted by OMV as a chance to broaden its energy portfolio and to accelerate expansion in growth markets. However, it was criticized by analysts for generating only limited synergies. It also caused a sharp drop in OMV shares.
Social Democrats, provinces balk at hydro sell-off
It also met political resistance in Austria, where the opposition Social Democrats and provincial governors felt it put Austrian ownership of Verbund’s hydropower assets at risk. National elections are due in Austria in October or November.
Bartenstein was preparing legislation that would enable the federal government’s stake in Verbund to fall below the current 51 percent, a pre-condition of the deal going ahead. To pass that legislation, the Social Democrats’ support was needed.
While the Social Democrats initially indicated they supported the deal, their head, Alfred Gusenbauer, said May 22 that the government should retain a majority stake of Verbund’s hydropower unit, which the firms deemed unacceptable. Bartenstein said Gusenbauer then demanded that the public sector control 51 percent of the merged company.
Minister: Firms failed to sell the deal
Grasser said the company heads had not sold the deal well enough.
“They were evidently not able to express and explain the advantages of the deal … either to politicians or the market,” Grasser said.
OMV Chief Executive Wolfgang Ruttenstorfer had said Verbund no longer can build large-scale hydropower stations and is moving towards gas-fired generation. He had added that the deal would broaden OMV’s energy portfolio, moving it towards renewable energy by buying into Verbund’s hydropower.
A year ago, Verbund, Austria’s largest utility, abandoned a planned partial merger with five other Austrian hydropower producers because the synergies it would bring were insufficient. Verbund said changes in the European and Austrian power markets made it impossible to complete the EnergieAllianz deal.