Hungarian government prepares to buy back Richter bonds to keep its 25% stake

The Socialist Party in Hungary has proposed an amendment to the State Assets Act in a bid to ensure that the government keeps its 25% stake in  the country's biggest drug manufacturer, Richter Gedeon. The legislative  changes would allow - and effectively force - it to buy back bonds  convertible for Richter shares. The move has effectively ended recent  speculation about Richter's future ownership after the  government-controlled convertible bonds expire in September this year.

The Hungarian government sold its 25% stake in Richter in September  2004 through a convertible bond and it is up to it to decide whether the  holders would receive cash or Richter shares when the convertible bonds  expire. Provided the proposed legislation passes the Budapest  Parliament, the state could continue to remain the biggest shareholder.  To pass the bill the minority socialist government will require the  support of some opposition Members of Parliament too.

Richter welcomed the proposal, saying that "the government keeping its  stake in the company would ensure the stable ownership structure"  necessary for the pharmaceutical manufacturer to continue its growth  strategy. According to Richter spokeswoman Zsuzsa Beke, buying back the  bonds could cost the government as much as 200 billion forint ($976.0  million). With the recently-introduced economic austerity program in  Hungary, it is hard to see where this money would come from.