VIENNA, August 6, 2008 (AFP) - Austrian oil and gas group OMV withdrew a controversial takeover bid for MOL of Hungary on Wednesday after EU officials objected to the effects of the resulting group on competition in central Europe.

'OMV revokes its intention published on September 25, 2007 to make an offer to shareholders of MOL of 32,000 Hungarian forints (136.2 euros, 211.35 dollars) per share,' the group said in a statement Wednesday.

On June 16, the European Commission expressed reservations about a potential merger of OMV and MOL. Noting that OMV was already the biggest oil and gas group in central Europe, it said the deal as proposed would have created serious competition problems in the region.

OMV said that other options for a deal were unacceptable to it.

'The European Commission has indicated that it would not accept commitments that OMV had proposed; since other commitments would be unacceptable to OMV, OMV has decided to withdraw the merger notification filed with the European Commission on January 31, 2008,' it said.

The Austrian group said it had proposed creating a refinery complex, integrating two closely located refineries, one in Austria and one in neighbouring Slovakia, with the possibility of a third party holding a capacity share.

But Brussels found these proposals unacceptable.

'OMV is not prepared to offer more far-reaching commitments without jeopardising the economic and strategic rationale for the transaction,' the Austrian group replied.

State-controlled OMV launched its bid to acquire privately-held MOL in 2007 with the aim of creating a central European energy powerhouse.

But the bid came into fierce opposition by both company management and the Hungarian government, which argued that the hostile takeover raised national security concerns over Hungary's energy supplies.

The Hungarian parliament even passed a law, dubbed Lex MOL, aimed at protecting energy companies deemed to be of strategic importance from takeover, effectively blocking OMV's bid.

This led the European Commissioner for Internal Market and Services, Charlie McCreevy, to issue a warning to Budapest, saying the law was 'incompatible' with EU rules allowing unrestricted cross-border investment in Europe.

OMV, which has a 20.2 percent stake in MOL, said its offer would have benefitted the oil and gas industry in central Europe and could have helped deliver some 400 million euros in pre-tax synergies.

'The combination of both companies would have significantly enhanced the security of energy supply throughout the region through both greater diversification of crude oil supply, as well as the greater scale in upstream to generate additional growth of the combined resource base,' OMV Chairman Wolfgang Ruttenstorfer said in the group's statement.

A merger between OMV and MOL would have created one of Europe's largest oil and gas groups, with an estimated capitalisation of 27 billion euros.