Deals of the Year 2013: State-based moves
Every year, the Budapest Business Journal attempts to present the most significant deals of the past 12 months. Since only a fraction of these are made public, and of the few that are only a minority disclose a transaction value, the task is a real challenge. Due to the lack of transparency and reliable data on the transactions market, the results are based not only on publicly available facts, but also on expert opinions gained during our numerous consultations with some of the industry’s most well-known and respected specialists (see list at bottom of this article), as well as on subjective judgments.
In compiling the list, BBJ separated market transactions involving private individuals and/or enterprises from deals in which the state was the buyer; significant deals of this sort may be found here. As increasing government activity has contributed to deal flow in several sectors, we thought it important to list the major state-related deals in order to get the full picture of the transaction landscape in Hungary; see below for our results.
BBJ’s list of deals in the pipeline for 2014 will be posted tomorrow.
State-owned MVM acquires E.ON’s Hungarian gas business
The state-owned Hungarian Electricity Works (MVM) acquired German utility E.ON SE’s natural-gas businesses in Hungary as part of a government plan to strengthen the state’s hold on strategic assets and cut utility prices. The agreement was signed in March 2013.
MVM paid HUF 260 billion for the business and an additional HUF 21 billion for the company’s cash stocks and tax refunds. The acquisition included 100% of the shares in E.ON Földgáz Storage Zrt and E.ON Földgáz Trade Zrt. This was a perfect example of the government using non-market and regulatory pressure to improve its negotiation position and ultimately nationalize a strategic industry.
MOL sells majority stake in strategic gas reserves
MOL signed an agreement in October 2013 to sell its 72% stake in MMBF Földgáztároló, which operates the country’s strategic gas reserves. The state acquired 51% of the operator through the Hungarian Development Bank (MFB), while the Hungarian Hydrocarbon Stockpiling Association acquired 21.46%, raising its stake in MMBF to 49%. MOL did not reveal the price of the transaction but said it was fully cash-based. According to press reports, the stake cost about HUF 140 billion.
Takeover of savings cooperatives
Shareholders of Takarékbank, an umbrella bank for Hungary’s savings cooperatives, approved the acquisition of a majority stake in the bank through a HUF 655 million forint capital increase by state-owned postal service provider Magyar Posta in August. The vote was taken under serious pressure, as a no-vote would have excluded the savings cooperative from among TakarekBank shareholders and would have resulted in the withdrawal of its operating license under the new law.
The cooperatives received a single preference share apiece for their stake in the bank. The MFB bought a 38.46% stake in Takarékbank from Deutsche Zentral Genossenschaftsbank AG (DZ Bank) in November 2012.
Acquisition of bits and pieces in the financial sector
The state was quite active in other areas of the financial services sector, too. It acquired 49% stakes in Gránit Bank and Széchenyi Bank. The state raised capital in Gránit Bank, which aims to operate as a direct bank without a branch network, by HUF 2.58 billion.
The bank’s majority owner is Magyar Tőketársaság, a holding of the construction industry tycoon Sándor Demján. Széchenyi Bank’s majority owner is T&T Ingatlanforgalmazó es Vagyonkezelő, a company tied to Government Debt Management Agency (ÁKK) head István Törőcskei. State-owned Magyar Posta signed a strategic agreement with FHB Mortgage Bank to acquire utility billing management company Díjbeszedő Holding (DBH) in July. FHB also acquired a 50% indirect stake in Magyar Posta Investment Zrt, which aims to sell investment products and services in post offices. The transaction was closed in November.
Bond issue with a twist
State-owned Magyar Export-Import Bank (Eximbank) issued bonds worth €400 million in September 2013. The bonds, which will expire in February 2019, carried a coupon of 2.125%, and were issued with a guarantee from the World Bank’s Multilateral Investment Guarantee Agency (MIGA). Thanks to the guarantee, buyers of the bond included investors from Japan, Norway, Switzerland, the Benelux countries and Germany which would not usually buy Hungarian or plain Eximbank bonds. The bond was the second issue under Eximbank’s €2 billion medium-term issuance program, through which the bank also issued €500 million five-year bonds in December 2012.
BBJ would like to thank the following for their contributions to this article: Allen&Overy managing partner Zoltán Lengyel; Deloitte managing partner Béla Seres; Equilor Corporate Finance manager Ágnes Svoóc; Falkenburg Corporate Finance partner Gábor Kurutz; Invescom Corporate Finance managing director Zoltán Siklósi; Jalsovszky Law Firm senior associate Ágnes Bejó; KPMG director Tamás Simonyi; and PwC director Ervin Apáthy.
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