VIENNA, August 6, 2008 (AFP) - Austrian oil and gas giant OMV finally ceded defeat Wednesday in a long battle to buy Hungarian rival MOL, announcing it was withdrawing its bid in the face of EU opposition to the deal.

OMV said in a statement it had decided to 'revoke its intention to make an offer to shareholders of MOL of 32,000 Hungarian forint (136.2 euros, 211.35 dollars) per share.'

The decision finally closes the book on OMV's long-running battle to take over MOL and create a central European energy powerhouse.

State-controlled OMV originally launched its bid to acquire privately-held MOL in September 2007.

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.

But it was the European Commission's reservations about the deal that finally put the nail in the coffin to OMV's ambitions.

On June 16, Brussels had said that because OMV was already the biggest player in the oil and gas markets in central Europe, a tie-up with MOL would seriously hamper competition in the region.

In the EU Commission's daily 'mergers notification list' on Wednesday, OMV's bid was confirmed as 'withdrawn'. But Brussels issued no further comment on the matter.

OMV dimissed as 'unacceptable' alternative scenarios under which the EU would have allowed a tie-up to go ahead.

'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,' the Austrian giant said.

OMV 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 retorted in its statement.

While the EU Commission had expressed concern about the competitive implications of a tie-up between OMV and MOL, Brussels also hit out at Hungarian attempts to block the deal, notably by way of its Lex MOL.

European Commissioner for Internal Market and Services, Charlie McCreevy, had warned Budapest that the law was 'incompatible' with EU rules allowing unrestricted cross-border investment in Europe.

OMV, which has a 20.2 percent stake in MOL, argued a combination of the two 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,' said OMV Chairman Wolfgang Ruttenstorfer.

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

On the Vienna stock exchange, OMV shares were the biggest gainers on Wednesday, jumping 2.73 euros or 6.45 percent to 45.05 euros.

But the share was also being driven by the news that the group's net profit surged 52 percent to a record 1.13 billion euros in the first six months of 2008, beating both its own and analysts' expectations.