The Minister of National Economy has prohibited the acquisition of a Hungarian-owned dairy company by a foreign investor, the Ministry of National Economy (MNE) announced.
According to the statement, the decision was based on the fact that the transaction would have posed a risk to the security of food supply for Hungarian families. The strategically important dairy sector currently employs more than 15,000 people. The government's objective is to renew and develop the food industry, preserve and further strengthen sovereignty, and ensure full supply of the Hungarian population with high-quality and affordable food products, the Ministry wrote.
On June 5 of this year, the Ministry of National Economy received an official notification stating that a foreign-owned corporate group intended to acquire 100 percent of the business shares of Alföldi Tej Ltd., a Hungarian-owned company.
With the involvement of the Ministry of Agriculture, the Ministry of National Economy examined the content of the purchase agreement and decided to prohibit the transaction, on the grounds that the related acquisition of ownership could endanger Hungary's national interest. The Ministry of Agriculture and members of the Dairy Product Council also agreed that the risk was present, the ministry stated.
Alföldi Tej Ltd. currently accounts for nearly 20 percent of domestic raw milk procurement. Due to this significant market share, foreign ownership could cause substantial market disruption in domestic milk production and procurement, as well as create a high level of supply security risk.
If Alföldi Tej Ltd., a Hungarian-owned company, were to come under foreign control, the performance of the domestic processing industry would decline: raw milk would be exported, dairy products produced abroad would have to be purchased at higher prices, and well-known and popular products could disappear from the shelves of Hungarian stores.
The prohibition of the transaction is carried out in the interest of securing the population's food supply. Following the restrictive decision, the dairy company offered the transfer of ownership rights to the Hungarian state under the same conditions as those under which it had planned to sell to the foreign company. The acquisition is currently under review by the Hungarian state, according to the MNE's statement. However, it should be added, that the Hungarian state is not obliged to purchase it, still in a case when it prohibits the sale of such property or assets under applicable laws and regulations.
For the above reasons, careful planning should be considered in case of mergers and acquisitions of Hungarian companies.
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