Hungary Ups Ante in Budapest Airport Tussle With Higher Offer

(Bloomberg) -- The owners of Budapest Airport are considering entering into formal negotiations to sell the hub to the Hungarian state after receiving a revised offer, according to people familiar with the matter.

A government-led consortium put forward a new proposal to purchase a majority stake in the airport, the person said. The offer, received at the end of September, is higher than the earlier bid but is still considered to be below market value when compared with similar deals. Bloomberg reported in July that Budapest Airport had rejected an earlier offer, deeming it too low.

The airport’s owners are expected to set out their terms for entering into formal talks and due diligence as early as next week, said the same person, adding that a final decision on whether to sell has yet to be taken.

Budapest Airport operator AviAlliance, a German-based airport management company which is also the biggest shareholder, declined to comment, as did Hungary’s Innovation and Technology Ministry, which is leading negotiations for the government.

Prime Minister Viktor Orban has sought to reduce foreign ownership in an increasing number of industries he considers strategic, and he has said the capital’s hub is key for tourism and broader economic development. 

The government wants to conclude the purchase by the end of the year, the person said. Orban is under the gun to close the deal before parliamentary elections next year, with his ruling party and the united opposition tied in polls ahead of the most closely fought general ballot in more than a decade. The opposition has threatened to scrap several major business deals Orban has championed.

State Retaliation?

Budapest Airport’s owner until recently ruled out selling the lucrative hub but they’ve also expressed concerns about potential state retaliation if they didn’t agree to part with their stake.

Most recently, the government has been stalling a request made this summer to reopen one of the hub’s terminals. Earlier hardball tactics have included blocking pandemic funds and permits to develop the facility, as well as harsh criticism of how the airport is run, which the operator considers unfounded, Bloomberg reported in April.

Among the terms and conditions the hub’s owners are likely to have is to know the identity of the other members of the consortium and whether the group has the financial capability and technical expertise to acquire and run the airport, the person said.

The airport’s owners have been informed that partially state-owned refiner Mol Nyrt, and Daniel Jellinek, the owner of local real estate developer Indotek, which had business deals with Orban’s family, are part of the consortium but that information wasn’t included in the latest non-binding offer. Bloomberg first reported a  year ago that a consortium including Mol and Jellinek had approached the airport with an ultimately unsuccessful unsolicited offer. 

Last year, Budapest Airport reported Ebitda of 38 million euros ($45 million) and a full-year loss of 110 million euros after a collapse in travel. The airport expects operations to return to pre-Covid levels by 2023.

The hub’s privatization started in 2005 and the Hungarian government sold its remaining stake in 2011, a year after Orban returned to power. The concession agreement lasts until 2080.

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