Indian-Chinese-Hungarian consortium reportedly buys MKB

Indian-Chinese-Hungarian consortium reportedly buys MKB
Speculation over the sale of MKB by the state remains rife
By bne IntelliNews March 30, 2016

A consortium led by Hungarian partners, and including Indian and Chinese private and institutional investors, has bought lender MKB from the Hungarian state, local press reported on March 30.

The consortium, which reportedly put in the best offer for the bank, also includes Hungarian pension fund Pannonia, a new local private equity fund called Metis, and MKB management, reports Figyelo, citing unnamed sources. The Magyar Nemzeti Bank, which has overseen MKB - previously Hungary's fourth largest bank - since it was bought by the state in 2014, has said it will not announce a deal, or the identity of the buyer, until the summer.

The deal is yet to be approved by the central bank's Financial Stability Board (FSB), Figyelo claims. The MNB will have 60 days following a decision from the FSB to officially announce the new owner.

Later in the day, MKB’s CEO Adam Balog confirmed the list of buyers, and noted that the local partners will control the bank, according to Reuters. Metis will take a stake of 40-50%, while Panonnia will hold 10%, he said. Blue Robin Investments SCA, a Luxembourg-based fund that groups Chinese and Indian investors, is also set to buy 40-50%.

"Hungarian owners will be in majority, with a strong foreign ally,” Balog said. The CEO moved from his post as deputy governor at the MNB to take the helm at MKB in July.

Speculation has risen recently that the MNB itself may have bought MKB via its six 'non-profit' foundations, using private equity funds as cover. Balog backed up current MNB Deputy Governor Marton Nagy's recent rejection of those claims.

Metis was created by private equity fund manager Minerva in February. Following the speculation that the fund is part of the consortium buying MKB, Minerva announced that Metis was launched "with the participation of domestic investors" with HUF31bn of registered capital. However, the fund manager did not confirm that it is involved in the purchase of MKB. 

The list of investors in Metis is not public. The senior officials featured on Minerva's website are all alumni of Raiffeisen Bank International's Hungarian unit. Balog said the central bank's foundations are not involved in Metis.

Earlier speculation suggested MKB management was in line to take up to 10% of the bank's shares. Balog did not discuss whether MKB managment is involved in Metis.

Pannonia Pension Fund is Hungary's fifth largest voluntary pension fund and a strategic partner of CIG Pannonia Life Insurance. On January 6, the fund subscribed for HUF1.4bn (€4.5mn) of newly issued shares in Granit Bank during a HUF3.1bn rights issue. The state owns 49.97% of the small lender, alongside several members of management who have connections to government friendly lenders such as OTP and FHB. It has been earmarked by Nagy in the past as one of a handful of locally owned lenders with the potential to replace foreign banks in Hungary.

The press reports offer no clues about the identity of the Chinese or Indian investors. Figyelo only writes that there are both private and institutional investors in the consortium. China's President Xi Jingping is currently on a visit to the Czech Republic, with Central and Eastern European states racing for investment from the Asian country's state-controlled giants.

The government bought MKB from Germany's BayernLB for €55mn, claiming it would reprivatise the bank soon. The European Commission gave the go-ahead for the Hungarian government to provide aid for the restructuring of the bank in December. According to that deal, MKB must be listed by the end of 2019; the MNB has said it wants to offload a majority stake by June.

Alongside Budapest Bank, which the state bought last year, MKB is being lined up to make an IPO on the Budapest Stock Exchange, to kick off an effort to revive the bourse. The MNB bought control of the stock exchange late last year.

It has also previously been reported that MKB hopes the European Bank for Reconstruction and Development (EBRD) will buy a minority stake. Balog claimed to Reuters that the international institution had spoken with all suitors for the bank, and could still be involved.

"Whether the owners decide to actually get the EBRD involved or not, I don't know at this stage, but I would support the EBRD to appear among the owners," the CEO said. An EBRD spokesman noted that it had "discussed the investment opportunity with a number of potential bidders but did not itself submit a bid."