Hungary is set to privatise the majority of its defence industry interests with 4iG, closely aligned with the government acquiring a 75% plus one vote majority in state defence company N7 Holding, while the state will retain a 25% minus one vote minority share.

The new holding company will consolidate nine key Hungarian defence firms, some of them in minority foreign ownership, including aircraft and helicopter component manufacturers, ammunition and weapons producers, and developers of land-based military systems.

The value of the companies involved in the transaction is estimated at HUF75-83bn (€190-210mn) each, the National Economy Ministry said.

Critical infrastructure such as real estate, plants and factories will remain in state ownership, for the use of which N7 will pay a fee.

4iG is one of the region's leading integrated ICT groups, with a robust presence in IT systems integration and telecommunications in Hungary and neighbouring countries, posting HUF700bn in revenue last year compared to just HUF15bn a decade ago. Its growth has been aided by the Hungarian government's strategic push to foster national champions in key sectors such as defence, telecoms and critical infrastructure.

By giving 4iG a controlling stake, the ICT giant could benefit from the scaling up of Hungary's defence industry ahead of the projected increase in defence spending. NATO member states, including Hungary, are planning to boost their military budgets to reach 5% in the medium term.

4iG plans to leverage the transaction to boost its presence in international markets, particularly in light of growing European defence investments, the government said, adding that the involvement of a private company could enhance Hungary's export potential, as the state alone has limited access to global business networks.

"This transaction is a milestone for both 4iG and Hungary's defence industry. "It marks the first public-private partnership to create an integrated, majority Hungarian-owned defence enterprise," said 4iG chairman Gellert Jaszai.  The transaction is expected to be finalised by September.

The largest single shareholder in 4iG is iG COM private equity fund (38.93%), managed by Diofa Asset Management, but the fund itself is controlled by chairman Gellért Jaszai, while German industrial giant Rheinmetall AG owns 25.12% in 4iG. KZF asset manager and iG TECH Invest Ltd., both controlled by Jaszai, hold 12.12% and 1.71% of the shares respectively.

The privatised portfolio includes Aeroplex Ltd, an aircraft maintenance firm; Airbus Helicopters Hungary, a helicopter component manufacturing joint venture majority-owned by Airbus (70%) with a 30% stake held by N7 Holding; Rheinmetall Hungary Munitions Plc, which operates a munitions plant 51% owned by Rheinmetall, 49% indirectly by N7 Holding; and Rheinmetall Hungary Plc, responsible for developing and producing Lynx KF41 infantry fighting vehicles (also 51% Rheinmetall, 49% N7 Holding).

Also included are Hirtenberger Ltd and its subsidiaries, engaged in mortar and ammunition manufacturing; SATYPS PSP Hungary Plc, which specialises in advanced surface treatment technologies; Dynamics Nobel Defence Plc, which manufactures barrels for RGW 110 shoulder-fired anti-tank rocket launchers and develops integrated weapons systems; Arzenal Fegyvergyer Plc, a producer of small arms and defence components; and Colt CZ Hungary Plc, which manufactures small arms including the CZ BREN 2 assault rifle (51% owned by Colt CZ Group, 49% by N7 Holding).

"This is not a business deal, this is a sell-off of national security," commented opposition leader Péter Magyar, accusing Prime Minister Viktor Orban and his associates of pursuing private gain in a sector he argued must remain under full state control.

The leader of the Tisza Party called the deal "tantamount to treason" and a major national security concern. He warned that if Tisza were to win the election, it would annul the agreement.

The agreement announced after the bell on Wednesday, June 11, is expected to further boost investor confidence in 4iG's strategic direction. The company's shares have surged 88% year to date.