Another major milestone towards acquisition of Grupa LOTOS by PKN ORLEN

In the memorandum of understanding, PKN ORLEN and the State Treasury confirmed their intention to proceed with the transaction. At the same time, both parties declared further cooperation and their will to continue negotiations to agree on the final scope and structure of the transaction.

‘We are determined to acquire Grupa LOTOS. This is our priority, and the memoranda of understanding signed by all of the parties involved bring us closer to completing the transaction in a smooth manner. Establishment of a single strong group, comprising not only LOTOS but also Energa and PGNiG, is necessary considering the future of their business and shareholder value creation. The acquisition will also benefit Poland’s economy as the integrated group will have a greater capacity to grow through investment and a stronger negotiating position. A robust multi-utility group will strengthen energy security of Poland. The region of Pomerania and its residents will be among the key beneficiaries of the transaction, as we will be better placed to engage in initiatives spanning social outreach, culture and sports across the region,’ said Daniel Obajtek, President of the PKN ORLEN Management Board.

In the memorandum of understanding, the parties confirmed that the transaction would be conditional upon the implementation of remedies negotiated with the European Commission. Therefore, PKN ORLEN and Grupa LOTOS declared their readiness to work together towards this end. The companies also agreed to cooperate with the State Treasury to support it in analysing the scope of the remedies and defining the scope and structure of the transaction.

PKN ORLEN and Grupa LOTOS will, to the extent permitted by applicable laws, take the necessary organisational measures and cooperate to implement the remedies, in particular to make it possible for PKN ORLEN to specify how the remedies are to be implemented and to manage their implementation on an ongoing basis based on mechanisms agreed between the two companies.

The strategic objective of the transaction is to build a strong multi-utility group, resilient to the changing macroeconomic environment and capable of completing vital growth projects, including ones consistent with the energy transition objectives. The remedies agreed on with the European Commission are optimal and based on analyses of the transaction’s viability and energy security. They will facilitate smooth execution of the transaction to the benefit of all the parties involved, and thus further and consistent transformation of the company into a multi-utility group.

The remedies include commitments of PKN ORLEN and Grupa LOTOS with respect to fuel production and wholesale, fuel logistics, retail, aviation fuel and bitumen. The decisions on how the specific conditions are to be fulfilled and on other transaction details will be agreed with potential external partners in the course of separate discussions and negotiations.

​The acquisition of Grupa LOTOS by PKN ORLEN was initiated in February 2018 by signing a Letter of Intent with the Polish State Treasury, which holds 53.19% of voting rights at the General Meeting of Grupa LOTOS. In November 2018, a draft application for approval of the concentration was submitted by PKN ORLEN to the European Commission. While working on the document, PKN ORLEN and Grupa LOTOS received hundreds of enquiries from the European Commission, to which they promptly replied. Effective cooperation between all the parties led to the successful drafting of a final application, which was submitted to the Commission in early July 2019. At the end of August 2019, an agreement was signed between PKN ORLEN, the Polish State Treasury and Grupa LOTOS to define a framework structure for the proposed transaction. In late September 2019, as a matter of customary practice, the Commission issued a standard ‘stop the clock’ decision for the second phase of the merger negotiations, which was stopped in early March 2020. On April 8th 2020, the Commission provided PKN ORLEN with an opportunity to review the findings of the analyses it had carried out as part of the second phase of the procedure. In line with the practice established for that phase, the ‘Statement of Objections’ procedure was used. At the end of April 2020, PKN ORLEN submitted a formal proposal of remedies; in early May, a market test began, and on July 14th 2020 the European Commission conditionally cleared the acquisition of Grupa LOTOS by PKN ORLEN.