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Hungary’s surprise veto over $ 1 billion Aegon deal with Vienna insurance sparks outcry from Netherlands

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The Dutch government has expressed concerns to Hungarian officials after the decision in Budapest to block the sale of the local unit of Aegon NV to Vienna Insurance Group AG, according to several people familiar with the matter.

The matter was communicated through diplomatic channels, people said, asking not to be identified to discuss confidential proceedings. Dutch and Hungarian authorities declined to comment, as did Aegon and Vienna Insurance.

Hungary this month refused to approve the key part of a € 830 million ($ 1 billion) sale of Aegon’s business in Central and Eastern Europe to Vienna Insurance. As governments across Europe routinely block deals to prevent market monopolies, save jobs, or for national security reasons, the Orban administration’s intervention raised concerns as it did not appear to fit in. these categories.

Instead, it is part of the Hungarian strategy to create national business champions, including in the financial sector where the merger of three banks is underway. The government has also recently accelerated its efforts to reshape the economy with measures such as transferring assets to foundations closely linked to the ruling party.

“Hungary has become a leader in Europe in terms of state intervention in the economy,” said Peter Akos Bod, former governor of the Hungarian central bank and professor of economics at Corvinus University in Budapest. “The stalling of this deal may have surprised many, but it actually fits the trend perfectly.”

With the deal in question, a handful of potential suitors, including Hungarian insurer Cig Pannonia Nyrt. are considered ready to replace Vienna Insurance if the deal fails, according to two people in the financial industry, who also asked not to be identified.

The largest stakeholder in Cig is a company partly owned by Lorinc Meszaros, Hungarian Prime Minister Viktor Orban’s closest business ally. Shares of the Budapest-based insurer rose 13% in two days after the veto went public. Its market value is 31.5 billion forint (105 million dollars). Cig declined to comment.

Hungary’s red light surprised Vienna Insurance, which at the time said it was in talks with the Hungarian government and still trying to salvage the deal.

New rule

The veto was all the more shocking as it came from the Interior Ministry – in charge of law enforcement, civilian intelligence services and local governments – rather than the Ministry of Finance which had been involved in the talks, according to a person familiar with the talks, speaking on condition of anonymity to discuss private deliberations.

The government’s objection was also a surprise as the legal basis for the intervention was established by last-minute legislation as negotiations between Aegon and Vienna Insurance flared up.

Two days before Vienna Insurance and Aegon announced the November 30 deal, Hungary amended the law on the protection of strategic sectors against hostile takeover attempts to include European Union countries and the United Kingdom. Switzerland, as well as financial service providers such as insurers and investment funds.

–With the help of Boris Groendahl, Diederik Baazil, Marton Eder and Piotr Skolimowski.

Copyright 2021 Bloomberg.

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