Government Proposes Acquisition of Majority Stake in Budapest Airport

In a significant development for Hungary's aviation industry, the Hungarian government has made a formal offer to purchase a controlling 51% stake in the company that operates Budapest's Liszt Ferenc International Airport, according to media reports. This move comes after years of speculation and attempts, and it marks a potential shift in ownership for Budapest Airport.

The offer has been extended to the current owners of Budapest Airport by a state-controlled investment company, as disclosed to Bloomberg by a source with knowledge of the matter, who wished to remain anonymous. While negotiations have not reached a point where the current airport owners can accept the offer, it has paved the way for further discussions regarding the takeover bid.
"We can confirm that the Hungarian government has made a new formal offer to acquire Budapest Airport Zrt," AviAlliance, which owns a 55.44% stake in the airport, said in an emailed response to Reuters. "The current owners have reviewed the offer in the interest of their funds and decided to enter into formal discussions, which are expected to last several months," it said.
Reports from Bloomberg also indicate that the remaining 49% stake could be acquired by another airport operator. However, the identity of this potential buyer has not yet been disclosed. The Ministry of Economic Development, which is overseeing the negotiations on behalf of Hungary, declined to comment on these recent developments.

Not the first attempt
Presently, Budapest Airport's largest shareholder, holding a 55.44% stake, is the German AviAlliance GmbH, representing a Canadian pension fund. Meanwhile, Singaporean equity fund Malton Investment PTE holds 23.33%, and Caisse de dépôt et placement du Québec, another Canadian pension fund, maintains a 21.23% stake.
This latest development follows a series of events that have unfolded over the past two years. In May 2021, the Hungarian government appointed a government commissioner, László Palkovics, who was then the Minister of Innovation and Technology, to oversee preparations for the acquisition of a majority stake in Budapest Airport. Negotiations were spearheaded by Minister Palkovics and a consortium of the state.
During the summer of 2021, two non-binding offers were made to purchase the airport. The first offer, submitted by Indotek, a leading investment management group, and Mol, Hungary’s largest oil and gas company, amounted to €4 billion. Subsequently, in the autumn of 2021, a second non-binding offer of €4.44 billion was put forward.
However, the prospect of reclaiming Budapest Airport seemed uncertain when, in December 2021, Prime Minister Viktor Orbán announced that a deal to reacquire Budapest Airport would not be considered until after the 2022 parliamentary elections. He cited reasons such as the state of the domestic budget, high inflation, and international financial market uncertainty for the delay.

Price tag unknown
Nevertheless, in February of this year, the issue resurfaced as a matter of strategic importance. Gergely Gulyás, a government spokesperson, revealed that the cabinet had authorized Márton Nagy, Minister for Economic Development, to engage in negotiations with the airport's owners. Prime Minister Orbán emphasized the airport's potential benefits and the importance of at least partial state or Hungarian ownership for national security.
"We would like to see these well-known objectives, which were also stated when the airport was sold by the Socialists, implemented this year or the next," the Prime Minister remarked, referring to the airport's privatization in 2005 when 75% of the company was sold under a 75-year concession by the Gyurcsány government. The buyer at that time was BAA Internacional Lcd, which was operating London's Heathrow airport, and the sale price amounted to HUF 464.5 billion (EUR 1.196 billion).
As of late May 2023, government officials have been discussing the possibility of concluding the transaction by year-end. If Bloomberg's reports hold true, this takeover bid could indeed pave the way for a potential acquisition of Budapest Airport by December of this year. The final price tag, however, remains a topic of speculation and anticipation.