OMV and Verbund merger collapses

MPs decided not to support the tie-up, which required the government to give up its controlling stake in Verbund.

The deal would have created a company with a market capitalisation of about 29bn euros ($37.1bn; £19.9bn).

But analysts had been sceptical, saying that the merger would bring limited synergies and that OMV should focus on its oil and gas businesses.

U-turn

The plans came as European governments sought to form energy companies capable of competing in the open market.

"They were evidently not able to express and explain the advantages of the deal...either to politicians or the market"
Karl-Heinz Grasser
Austrian finance minister

However the opposition Social Democrats party, which had initially said it would back legislation which would smooth the path for the merger, did a U-turn.

Along with provincial governors, it argued that ceding control of Verbund to the private sector would put Austria's hydro power assets - which are a source of national pride - at risk of a foreign takeover.

Instead they wanted the state to have a majority holding in the merged company .

In a brief statement, OMV said: "The necessary parliamentary decisions, which could not have been a precondition for the OMV and Verbund merger, will not be taken."

Defensive move?

Finance Minister Karl-Heinz Grasser said the two companies had not put forward a convincing business plan.

"They were evidently not able to express and explain the advantages of the deal...either to politicians or the market," he said.

OMV, the largest oil and gas group in the region, was set to pay 13bn euros for Verbund, which is 51% state-owned and Austria's main electricity firm.

When the deal was announced, some analysts saw it as a defensive step - creating a company which could give some protection against energy supplies being suddenly cut.

Austria imports most of the eight billion cubic metres of gas it uses every year.

In January it saw its gas supplies cut by a third for two days by Russian gas giant Gazprom, which was in a dispute over prices with Ukraine.

OMV has recently bought Romania's largest oil group, Petrom, as well as petrol station chains in Bosnia, Croatia, the Czech Republic, Italy and Slovenia.

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