Businessman linked to PM Orban acquires 49% stake in Hungary's MKB

Businessman linked to PM Orban acquires 49% stake in Hungary's MKB
By bne IntelliNews June 1, 2017

A private equity fund controlled by a Hungarian oligarch regularly named as a proxy for the prime minister has agreed a deal to buy a 49% stake in MKB Bank, it was announced on June 1.

The acquisition by Konzum PE Magantokealap needs the approval of the Magyar Nemzeti Bank, but that will likely prove a formality. The central bank, headed by Gyorgy Matolcsy, has been closely involved in opaque transactions surrounding the country's fifth largest lender over the past few years.

Once the deal goes through, Lorinc Meszaros – the mayor of Prime Minister Viktor Orban’s home village – will directly and indirectly hold 49% of the shares in MKB, further boosting his interest in the Hungarian banking sector. The former plumber previously raised his stake in state-owned mortgage bank FHB Jelzalogbank on April 21 through his private equity fund.

Konzum will acquire a 45% stake in MKB from Hungarian private equity fund Metis Private Capital Fund. Konzum will also establish a separate fund under the name Metis II, which will purchase a further 4% stake in MKB from Blue Robin Investments.

The sale of MKB last year was surrounded by a lack of transparency and speculation that the central bank’s controversial foundations were the actual buyers. After MKB was bought by the state in 2014, it was managed by the Magyar Nemzeti Bank. The central bank sold the lender to a consortium of private equity funds for HUF37bn, but the ultimate buyer has never been clearly identified.

The consortium included Metis Private Capital Fund, which took 45% of the shares. The main investor behind the fund is speculated to be Laszlo Szijj, owner of construction company Duna Aszfalt, who also has business ties with Meszaros and is a regular winner of state tenders, which is considered a useful guide in today’s Hungary as to who is close to the Fidesz government. Hungarian-born financier and philanthropist George Soros on June 1 accused the Hungarian prime minister of building a “mafia state”, which he defined as one that maintains the facade of democracy, while rulers used the media and judiciary to enrich and keep themselves in power.

Luxembourg-based Blue Robin Investments gained a 30% stake in the bank during the deal. The Indian businessman believed to be behind the fund sold 20.2% of his stake last month to Tamas Szemerey, Matolcsy’s cousin. That supported previous speculation that the Indian fund was little more than a proxy.

Former MNB official and now MKB CEO Adam Balog bought a 9.8% stake during the deal. Hungary’s Pannonia Pension Fund holds 10% in MKB; a further 15% is reportedly held by MKB management.