VIG's planned expansion by acquiring Aegon's CEE businesses temporarily blocked by the Hungarian authorities

12 April 2021 — Daniela GHETU
The transaction announced by Aegon in November 2020, of selling to Vienna Insurance Group (VIG) its insurance, pension and asset management business in Hungary, Poland, Romania and Turkey for a total consideration of EUR 830 million, has been stalled by Hungarian Ministry of Interior's unexpected denying of approval.

The transaction that would have put the Austrian group on a leading position on the Hungarian market was already in its final stages of the official procedures when, on 6 April, VIG was informed by the Hungarian Ministry of Interior that it would be denied approval for the acquisition of the Hungarian Aegon companies to a foreign investor. According to the Hungarian press, in the days leading up to the announcement of the acquisition, a new regulation appeared providing that such a transaction cannot take place without the approval of the ministry of the interior. Porfolio.hu has quoted Allen & Overy, the company that helped designing the transaction, saying that "FDI restrictions are on the rise worldwide, because of a kind of nationalist endeavor." In this context, the parties must demonstrate that the transaction does not pose a national security risk and get a certificate of approval from the Ministry of the Interior. Although this was expected to be "a mere formality," for the time being it blocked the entire operation.

"Our ties to Hungary have grown historically and have always been characterized by mutual appreciation. For a quarter of a century, we have been successfully investing in the Hungarian economy. Therefore, we were surprised by the announcement of the Hungarian authorities," commented CEO Elisabeth Stadler on the message of the Hungarian Ministry of Interior. "By assuming and insuring risks of daily life and through long-term investments, we are making a valuable contribution to the national economy, thus contributing to social security and securing jobs," she added.

Aegon's Central and Eastern European business consists of around 15 companies in Hungary, Poland, Romania and Turkey, with the Hungarian companies (insurance, pension fund, asset management and service company) making up an important part. Vienna Insurance Group plans to continue operating the companies to be acquired in Hungary under a new name in accordance with its local multi-brand strategy. VIG is represented by several companies under at least two different brands in all countries where it is the market leader (Austria, Czech Republic, Slovakia, Bulgaria, Northern Macedonia and the Baltic States). In Hungary, VIG would also become the market leader with the approval of the acquisition of Aegon's insurance company and plans to successfully position a second brand in addition to Union. The closing for the acquisition of Aegon's Central and Eastern European business is expected for the second half of 2021.

"We are therefore very interested in a further long-term partnership with Hungary for the benefit of both parties. It is a characteristic of our business philosophy to always maintain a consensus-oriented and partnership-based relationship with all public and private institutions in our countries, thereby fulfilling our responsibility to our stakeholders as the leading insurance group in the CEE region," Stadler also stated.

The transaction's proceeds, amounting to EUR 830 million, represented a multiple of 2.6 times the book value on June 30, 2020. The total net underlying earnings of Aegon's businesses in Central and Eastern Europe amounted to EUR 54 million for 2019, implying a transaction multiple of 15 times net underlying earnings.

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