Hungary violated the European Union's merger regulation when authorities vetoed the acquisition of the local business of Dutch insurer Aegon by Vienna Insurance Group (VIG), the European Commission said in a preliminary assessment of the case on January 19.
The veto was incompatible with Article 21 of the EU Merger Regulation as it infringes the freedom of establishment, it added. VIG announced in November 2020 that it agreed to acquire the businesses of Aegon in Hungary, Poland, Romania and Turkey for a price of €830mn, a deal that would have made VIG market leader in Hungary.
Aegon in Hungary is the third-largest player, with the largest home insurance portfolio and the third-largest voluntary pension fund. The company realised HUF137bn (€388mn) in revenue in 2020.
The acquisition of Aegon's business in Hungary was denied by the interior ministry in April 2021. Under state-of-emergency powers vested by parliament, Hungary's government has been equipped with legal tools to block foreign takeovers of domestic companies.
The EC noted that it has "exclusive competence to examine concentrations with a Union dimension" and said that member states may only take measures "to protect legitimate interests provided that such measures are compatible with the general principles and other provisions of EU law, and are communicated to the Commission except for limited instances".
The European Commission expressed its doubts as to whether the measure was aimed at protecting Hungary's legitimate interests and considered that Hungary's reasoning was insufficient. In addition, Hungary failed to inform Brussels about its plans to veto the merger, which should have been approved by Brussels before Hungary implemented it," the EC said.
Hungary has 10 working days to respond to the EC's preliminary assessment. If the response is "not adequate to remove the concerns", the EC may adopt a final decision concluding that Hungary has infringed the merger regulation and order it to withdraw the veto of the transaction.
Late in December, Finance Minister Mihaly Varga announced that the government signed an MoU with VIG on acquiring stakes in the local businesses of VIG and Aegon.
In a press release issued at the time, VIG said it had reached an agreement with the government of Hungary "on the principles of a cooperation and the further course of action, which provides for a participation of 45% by the Hungarian state" in the Hungarian Aegon companies and VIG's local unit Union Biztosito.