Hungary’s ruling party proposed legislation to ensure the government keeps its 25% stake in drug maker Richter Gedeon and effectively force the state to buy back bonds convertible for Richter shares.
Richter welcomed the proposal, submitted to Parliament by the ruling Socialists on Tuesday, and said the government holding onto its stake would provide the stable ownership structure necessary for the company to continue its strategy.
“We’ve always said that Richter needs a stable ownership structure to pursue its growth strategy and currently the state remaining the biggest shareholder would provide this stable background,” Richter spokeswoman Zsuzsa Beke told Reuters. But the cost of keeping Richter state-owned could be around HUF 200 billion ($942.6 million).
Hungary’s government effectively sold its 25% stake in Richter in September 2004 through a convertible bond. When the bonds expire in September 2009, the government can decide whether to give bond holders cash or Richter shares. “Depending on exchange rates, the cost of buying back the bonds will be on the magnitude of HUF 200 billion,” Beke said.
For the bill to pass, the Socialists, who are just a few seats short of a parliamentary majority, will need some opposition support. Socialists MP Tibor Kovács, one of the authors of the amendment, said he expected widespread support.
“We wanted to make sure that in a global financial environment like this, nobody even thought about selling Richter,” Kovács said. “We have been assured by the government of its support.” The bill also stipulates that the government would also have to hold onto to its single, special rights share in oil firm MOL as the company had been accidentally left off a previous list, Kovács said.
The Finance Ministry was not immediately available to comment. (Reuters)