Strange transactions amongst MKB shareholders

July 21, 2016

MKB

MKB’s employee stock-ownership program has purchased one-third of Blue Robin Investments’ 45 percent stake in MKB, reports Hungarian business daily Világgazdaság. The transaction was reportedly financed by OTP Bank.

Világgazdaság reports the mysterious, Luxembourg-based Blue Robin Investments sat on its newly-acquired stake for all of three weeks before selling one-third of shares in MKB to the bank’s recently created employee stock-ownership program.  There has been media speculation that Blue Robin Investments is owned by close confidantes of Hungarian Prime Minister Viktor Orbán and central bank governor György Matolcsy.

News of the stock transfer was announced by MKB on Wednesday, and an exclusive announcement of the ownership change was made on the Budapest Stock Exchange website shortly thereafter.

Blue Robin Investments reportedly sold the 15 percent MKB stake to the latter’s employees for HUF 5.5 billion (USD 19.25 million), or one-third of the amount the former paid for its 45 percent stake.

The breakdown of MKB’s new ownership structure is the following:

  • Metis Magántőkealap (Metis Private Fund) – 45 percent;
  • Blue Robin Investments SCA – 30 percent;
  • MKB Bank’s employee stock-ownership program – 15 percent; and
  • Pannónia Nyugdíjpénztár (Pannónia Pension Fund) – 10 percent.

Some background on MKB

The Hungarian state agreed to buy MKB for EUR 55 million (USD 74 million) from Bayerische Landesbank in July 2014, though the sale was concluded only months later.

Minister of National Economy Mihály Varga said the government’s deal with Germany’s state-backed bank fits its own strategy of increasing Hungarian ownership in the domestic banking sector, and that the purchase was the first important step for sectoral consolidation.

“Our hope is that MKB can regain its strong, competitive position within a year or two and then be sold on the market,” Varga said then.

But the Hungarian state’s plan has been an ambitious one because MKB was just hemorrhaging money.

The bank was performing so poorly that the state’s agreement with BayernLB included the latter waiving EUR 270 million in loans.

“The MKB has cost BayernLB about EUR 2 billion since 1994,” BayernLB Chief Executive Officer Johannes-Joerg Riegler said in 2014.

MKB plays musical chairs

Once the sale was complete, ownership of the bank was transferred from the Ministry of National Development to the Prime Minister’s Office.

Then, in late December 2014, ownership of MKB was transferred from the Prime Minister’s Office to the National Bank of Hungary (MNB). Orbán and MNB governor György Matolcsy held a press conference to announce that not only would the bank be handed over from the Prime Minister’s Office to the National Bank of Hungary, but that the MNB would also provide MKB a “protective net.”

About six months later, the MNB tapped then senior vice-president of Hungary’s National Bank Ádám Balog to take over the freshly-acquired loss-making bank.

Since then, MKB has popped up in news in scandals tied to the ruling party, including financing Andy Vajna’s purchase of TV2, selling off artwork to the MNB, and its own suspicious privatization.

The new owners of MKB are shrouded in secrecy, and experts have suggested that the owners are somehow tied to the Fidesz elite. The new owners completed the sale as a consortium, including a previously unheard of investment fund out of Luxembourg, a Hungarian pension fund, and a private fund.

This latest change in ownership signals a new era for MKB. Now, its management, including the former MNB senior vice-president, can benefit greatly from the HUF 5.5 billion employee stock-ownership plan reportedly financed by OTP.