Shares in Croatia’s INA surge after IPO

ZAGREB (Reuters) – Shares in Croatian oil company INA jumped more than 40 percent on their market debut on Friday after the government sold 17 percent of the company in an initial public offer in Zagreb and London.

The price per share had been set at 1,690 kuna (155 pounds) but rose to 2,400 kuna within 10 minutes after the listing at 10:15 a.m. British time. It later pared early gains to trade at around 2,200 kuna.

In London, INA’s global depository receipts (GDRs) HINAq.L are listed with one GDR representing one share.

The government allocated 54 percent of the total of 1.7 million shares to Croatian citizens, with the remainder going to local and foreign institutional investors. The government has an option to withdraw 2 percent of the stock, leaving only 15 percent for trade, should the share price fall.

Hrvoje Stojic of Hypo Alpe-Adria Bank said he expected the shares in INA, in which Hungarian oil refiner MOL bought a 25 percent stake in 2003, to get off to a lively start.

“Investor interest was 10 times higher than the stock offered. There are investors who want to have exposure in Croatia because it is in European Union membership talks and has not had any Eurobonds or IPOs in the last few years”.

“It’s a good chance for a short-term speculative buy in December. In the longer run, there are two triggers that can boost the price, MOL’s interest and the modernisation of refineries that would boost its profit margins,” Stojic said.

Croatian citizens, who were allowed to buy shares worth up to 38,000 kuna at a discount, will get one more share free for each 10 shares they own if they keep the shares for at least a year.

Tamas Pletser, a senior oil analyst at Erste Bank, said a lot of citizens would be tempted to sell now if the price went above 2,000 kuna.

INA is one of the last big state assets Croatia has to offer for sale since becoming independent in 1991.

MOL, which has been keen to increase its stake, is not allowed to buy INA shares in the market for six months after the IPO started. However, analysts said the Hungarian firm was quite likely to get a majority in the end.

“Perhaps not now, but in two years everyone expects MOL to try to agree with the new Croatian government to buy more shares, which could then trigger a buyout offer. I think in 2008-09 MOL could become a majority owner,” said Pletser.

Croatia is due to hold general elections some time in 2007.

“MOL’s six-month lock-up period will swiftly pass and then it can approach the Croatian government. MOL has considerable management rights in INA, so no oil majors are really interested in taking over INA in such a situation,” said Stojic.

The government will earn at least 2.85 billion kuna from the sale, making it the biggest IPO in the country in the last decade.

Seven percent of the shares were distributed to veterans of the 1991-95 independence war and the cabinet plans to give another seven percent to former and current INA employees within six months after the IPO.

INA had done well in exploring oil and gas in the Middle East and Africa and is the dominant retailer in Croatia, although restrained by partial state control of fuel prices, and is in dire need of overhauling its two dated refineries at home.

It posted revenue of 21 billion kuna in 2005, up from 18 billion kuna a year before. Net profit in 2005 fell to 885 million kuna from 1.1 billion in 2004 due to changes in accounting standards, the high price of crude, currency losses and the government’s lid on local fuel prices.

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