Polish refiner PKN Orlen secures European Comission’s approval to acquire LOTOS

By Aron Adamski, BSc Economics @LSE



  • Acquirer: PKN Orlen S.A.
  • Target: Grupa LOTOS S.A.
  • Industry: Oil and Gas Refining and Marketing
  • Estimated value: n/a
  • Financing: n/a
  • Announcement Date: 27/02/2018
  • Acquirer Advisors: SMM Legal
  • Target Advisors: Weil Gotshal & Manges

Poland’s largest refiner is set to acquire a 66% stake in the country’s biggest gas group after it received an approval from European Commission. The deal will combine two large Polish oil and gas companies.

The approval of the transaction is subject to several conditions that the combined group must meet:

  • Sell 9 fuel storage depots to an independent logistic operator
  • Divest 389 retail stations in Poland (it amounts to 80% of LOTOS’ network)
  • Sell LOTOS’ 50% stake in the jet fuel-marketing venture it has with BP
  • Free-up 80,000 tonnes of jet fuel per annum to competitors through annual open tender

Poland’s government is pushing forward with the deal in a bid to create a group capable of competing in international markets.

“It looks like the idea is to create a big Polish company that has the scale to invest more upstream, or in whatever the government’s priorities are” ~ Jonathan Lamb, Wood & Co.


©PKN Orlen S.A.

The core business of Orlen is crude oil processing, production of fuel, petrochemical and chemical goods, as well as wholesale and retail of these products. It offers motor gasolines, diesel oils, fuel oils, light heating oils, liquefied gas, biofuels and aviation fuels. They also search for and extract petroleum and distribute electricity and heat.

Orlen has 2,679 stations across Europe and is partially state-owned, with the Polish government holding a 27.5% stake in the company.

  • Founded in: 1999
  • Headquartered in: Płock, Poland
  • CEO: Daniel Obajtek
  • Number of Employees: 20,262
  • Market Cap: $6.26B
  • EV: $8.41B
  • LTM Revenue: $27.91B
  • LTM EBITDA: $1.42B
  • EV/ LTM Revenue: 0.3x
  • EV/ LTM EBITDA: 5.92x


©Grupa Lotos S.A.

LOTOS operates in 82 countries, including Poland, Germany, France, and the UK. 53.19% of LOTOS is state-owned. LOTOS owns 493 petrol stations, a range of oils, car care products and JET A1 aviation fuel.

Moreover, they manufacture and deliver unleaded petrol, diesel oil, aviation fuel, naphtha and LPG. They are a vertically integrated fuel refiner and producer of chemical products and also provide specialised logistics services. Additionally, LOTOS engages in providing railway transport, laboratory testing services and storage of fuels.

  • Founded in: 1991
  • Headquartered in: Gdańsk, Poland
  • CEO: Paweł Jan Majewski
  • Number of Employees: 7,547
  • Market Cap: $2.9B
  • EV: $3.73B
  • LTM Revenue: $7.45B
  • LTM EBITDA: $321.12M
  • EV/ LTM Revenue: 0.5x
  • EV/ LTM EBITDA: 11.62x



The combined group will have a greater negotiating power when arranging prices with their suppliers, leading to economies of scale. Through lower prices in their end markets, the group will be able to compete on prices and grow their market share in Europe, beyond Poland and the CEE region.

“Between them, the two companies would have about 45 per cent of the fuel volumes sold on the domestic retail market” ~ Oleg Galbur, Raiffeisen Centrobank


  • Revenue synergies: more market power over petrol prices are expected to result in $76.2M of extra revenue
  • Cost and operational synergies: greater negoatiating position with suppliers and supply chain optimisation are expected to result in $279.4M of cost savings



Poland’s PM expressed support for the tie-up.

Political opposition has been against the acquisition. Critics say that the deal is aimed at creating a state-controlled monopoly with a stranglehold over oil and gas supply in Poland. If the combined group will aim to fulfil the goals of the government rather than strive to innovate and grow their revenues and profits, then the expected synergies may not be achieved.

“Both companies have good quality assets. I think the deal can be made to work, as long as the management is free to make decisions on a commercial basis.” ~Jonathan Lamb, Wood & Co.

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