Hungarian oil and gas major MOL Group has announced it will buy Bohemia Realty and PAP Oil, two companies that own and operate 124 filling stations under Pap Oil brand in the Czech Republic (with a 4% retail market share) for an undisclosed price.
“The investment is in line with MOL Group’s strategy to improve our presence and increase the retail market share in the supply radius of our refineries and increases further the synergies within the downstream segment,” the company said in a statement.
MOL Group is already present on the Czech fuel market via its subsidiary Slovnaft Česká republika, which owns 25 service stations under Slovnaft brand, representing a 0.7% retail market share. Following the successful closing of the transaction MOL Group will operate 149 retail stations throughout the country with an approximate combined retail fuel market share of close to 5% and will become the fifth largest company by the number of filling stations, it said.
The Hungarian group is also active in the retail and wholesale trade of petroleum products on the Czech market; Slovnaft Česká wholesale market share is 18%. MOL Group said its aim is to further pursue organic and inorganic opportunities in order to achieve at least a 10% fuel retail market share in the medium term. ‘The only problem is that PAP Oil does not belong to the high quality retail networks in the region and its profitability is rather poor...’
Wood & Company analyst Robert Rethy said in a note to clients Wednesday that with falling volumes and shrinking markets in its MOL’s core operating countries, captive markets are important for the profitable distribution of MOL’s refined products, to keep operating rates as high as possible in the key refineries. Hungary and Croatia have been hit particularly badly, and Slovakia is also seeing declining volumes, he said.
“The Czech Republic is a natural captive market for the MOL Group’s Bratislava (former Slovnaft) refinery. The only problem is that PAP Oil does not belong to the high quality retail networks in the region and its profitability is rather poor (PAP Oil reported Kč 33 million in EBITDA and Kč 18 million in net profit on Kč 4.7 billion on sales in 2011, according to the company registry and Czech Accounting Standards),” Rethy said.
“Therefore, we can only hope that MOL paid a reasonably low price for this asset (in our opinion, such a network should fetch less than $ 1 million/site value) and we would regard anything in excess of $ 100 million as somewhat expensive, despite the potential synergies.”