Hungary blocks overseas takeover of Alföldi Tej dairy cooperative

HUNGARY – Hungary has blocked the proposed acquisition of dairy company Alföldi Tej by an overseas consortium on the grounds it would pose a risk to food security.

A government statement issued on behalf of the Ministry of National Economy stated that a takeover approach for the business was received in June from a foreign-owned group of companies.

None of the interested parties were named as the Ministry said it had banned the acquisition, adding that the security of food supply for Hungarian families is paramount and the transaction would have posed a significant risk to it.

Hungary’s Ministry of Agriculture and the dairy industry representative body, the Milk Product Council, or Tej Terméktanács, have agreed with the government’s conclusions regarding the food security risk and backed the ban on the takeover from overseas.

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.

The government said, “Due to its significant market share, foreign ownership could cause significant market disruption in domestic milk production and purchases, as well as a high risk of security of supply.”

“If the Hungarian-owned Alföldi Tej Kft were to fall into foreign hands, the performance of the domestic processing industry would decrease: raw milk would be exported and dairy products produced abroad would be purchased at higher prices than before, and well-known and popular products would disappear from the shelves of domestic 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.

In June, Orban’s government modified Hungary’s foreign investment framework, granting the government pre-emption rights for inward mergers and acquisitions transactions and enabling it to acquire stakes in companies originally targeted by foreign investors.

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