Deals of the Year: In the pipeline for 2014

Deals

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.

Previously published lists on BBJ.hu focused on private enterprise-based acquisitions and state-related deals. Today, we present a list of deals in the pipeline for 2014.

General outlook
In 2014, state backed transactions are expected to continue to dominate the market, primarily in the energy and utility sector. In an attempt to reverse earlier privatizations to boost its role in industries considered strategically important, the government plans to nationalize further companies including six to seven utility firms in the near future. In the private sector, start-up IT and software firms are primarily expected to be acquisition targets. Due to narrowing operating margins, regulatory changes and economies of scale, consolidation may accelerate in several industries especially in financial services.

MOL board authorizes preparations for sale of INA stake
The board of directors of Hungarian oil and gas company MOL has authorized the company’s executive board to start preparations for the sale of MOL’s stake in Croatian refiner INA. The government of Croatia owns a 44.84% stake in INA and MOL holds about 49.1%. OTP chairman/MOL board deputy chairman Sándor Csányi told Forbes Hungary that it is not in MOL’s interest to sell its stake in INA, but the company has nevertheless offered the Croatian government the opportunity to purchase the shares. If Zagreb would not or cannot buy them, MOL aims to sell them to a third party.

In November, MOL filed a request for arbitration with the International Center for Settlement of Investment Disputes (ICSID) to start arbitration proceedings against the government of Croatia for breaching certain of its obligations and undertakings in relation to MOL investments in the country.

INA’s two shareholders have often been at odds over the way the company is managed, and tensions rose in October, after Croatian police issued an arrest warrant for MOL chairman-CEO Zsolt Hernádi, who it suspects of bribing former Croatian Prime Minister Ivo Sanader to give MOL management rights in INA.

Government offer to buy Dunaferr
The government announced in August that it would make a buyout offer for ISD Dunaferr steelworks after the company said it would lay off 1500 of its 5000 workers. The company’s CEO, Evgeny Tankhilevich, later said Dunaferr appreciated the government’s aim to assist, but not through a buyout.

Antenna Hungária up for sale
U.S. private equity fund TPG Capital is trying to break up French telecom towers operator TDF to help exit the company. TDF has businesses in Spain, Germany, Poland and Estonia, in addition to France. If terrestrial broadcaster Antenna Hungária splits from its French parent, the state could reportedly be among the potential buyers. TDF purchased 100% of Antenna Hungária from Swisscom for HUF 80.7 primarily in 2007.

Big banks to exit Hungary
Several European banking groups have been quietly trying to sell their Hungarian subsidiaries for years, but are now becoming more open about their plans. Raiffeisen Bank International said in an official statement that markets such as Hungary and Slovenia are currently under special review, and that a withdrawal from these markets cannot be excluded.

UniCredit’s CEE head Gianni Franco Papa told reporters that the bank was making money in Hungary but that the financial burden the government is imposing on banks and other segments of the economy is getting close to unbearable. He added that while tax alone was no reason to exit a country, “hopefully they are not going to impose other taxes because this would really break the camel’s back”. The bank was quick to ask for correction, stating that it “clearly intends to stay in Hungary”, adding, “Nevertheless we are closely monitoring the local business environment in order to adapt our business model in time and to secure positive results.”

Having failed to sell it as one business, Germany’s BayernLB decided to break up its troubled Hungarian unit MKB to improve the chances of a sale. BayernLB’s CFO Stephan Winkelmeier said that MKB’s retail and corporate banking activity would be bundled into one unit that should be easier to sell than the bank as a whole. A separate unit would be established to handle long-term loans with high refinancing needs. However, the breakup process has unexpectedly been put on hold. The European Commission ordered BayernLB in 2012 to restructure and sell some businesses as a precondition for approving state aid for the bank.

Praktiker up for sale
Machinery maker MPF Holding is in advanced talks to buy do-it-yourself chain Praktiker’s stores in Hungary. The group wants to invest almost €10 mln in the 21 Praktiker stores, keeping its suppliers as well as its nearly 1,200 employees. In 2010, MPF bought troubled Hungarian gas heater producer FEG and made an offer for the Hungarian units of DIY chain Bricostore in 2012, but it was rejected.

Wizz Air IPO
Budget carrier Wizz Air has reportedly appointed three banks to manage a planned initial public offering in London. Budapest-based Wizz Air, which has 16 operating bases in Eastern Europe, flies more than 250 routes across Europe and has a fleet of more than 40 Airbus planes.

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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