PKN Orlen, advised by Gide Brussels, sees its acquisition of Grupa Lotos cleared subject to commitments, by the European Commission

The European Commission cleared the acquisition of Grupa Lotos by PKN Orlen, the two larger Polish integrated oil and gas companies. Both are mainly active in Poland as well as in several other Central and Eastern European countries and in the Baltic countries.

This is one of the largest ever mergers in the energy sector in the region concerned.

This transaction combines Poland’s only two oil refineries, as well as two of the country’s biggest network of fuel stations. It will create a strong and integrated company better placed to compete in international markets and resilient to oil market fluctuations.

Despite the complexity of the competition issues raised, Gide Brussels with its co-counsels Geradin Partners, SMM Legal and Compass Lexecon convinced the Commission to clear the transaction by proposing remedies providing refining capacity and significant import potential.

These are innovative solutions, a first in EU merger control, which are to be welcomed. The transaction has been secured by a complex package of structural and behavioural commitments:

• The divestment of a 30% stake in Lotos’ refinery, accompanied by strong governance rights, with the purchaser having the right to approximately half of the refinery’s diesel and gasoline production, while also giving the purchaser access to important storage and logistics infrastructure;
• The divestment of nine fuel storage depots to an independent logistics operator, and to build a new jet fuel import terminal in the Polish city of Szczecin, which would be transferred to the independent logistics operator on completion;
• The release of most of the capacity booked by Lotos at independent storage depots, including the capacity booked at Poland’s biggest terminal for the import of fuels by sea;
• The divestment of 389 retail stations in Poland with a supply agreement of fuels;
• The sale of Lotos’ 50% stake in the jet fuel-marketing joint venture that it has with BP, the continuity of supply the joint venture and the access given to the joint venture to storage at two airports in Poland;
• The divestment of two bitumen plants in Poland, and the supply of the purchaser with up to 500 000 tonnes of bitumen/heavy residues annually.

The Commission’s decision comes after more than 12 months of proceedings, the reply to a statement of objections of more than 450 pages in April 2020 and the first virtual hearing during the Covid-19 pandemic.

Gide, with a team comprising partners Laurent Godfroid, Stéphane Hautbourg, Benoit Le Bret, Piotr Sadownik (from the Warsaw office) and associate Manon Portier, advised PKN Orlen (with Robert Śleszyński, Artur Cieślik and Janusz Szurski of PKN Orlen managing the transaction).

Other advisors included Geradin Partners, SMM Legal, and Compass Lexecon.