Study on State asset management in the EU

Pillar 4 – Ràba automative holding PLC

Contract: ECFIN/187/2016/740792

Written by KPMG and Bocconi University February 2018

EUROPEAN COMMISSION Directorate-General for Economic and Financial Affairs Directorate Fiscal policy and policy mix and Directorate Investment, growth and structural reforms European Commission B-1049 Brussels

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Ràba Automotive Holding plc

This note discusses the re-nationalisation phenomenon that took place in post 2010. In particular, this case describes and then discusses the effects of the re- nationalisation1 of a formerly-privatised company operating in the automotive sector and in the military industry, the Hungarian Ràba Automotive Holding plc (i.e. Rába Járműipari Holding NYRT - Rába) by the Hungarian National Asset Management Inc (i.e. Magyar Nemzeti Vagyonkezelő ZRT - MNV). Rába was privatised in January 1992 and its shares were introduced in the in 1997.

1. INTRODUCTION

Hungary experienced several trends in public and private ownership during the last 30 years. In fact, in the early 1990s, after a push for privatisation of major Public Sector Holdings (PSHs) supported by the new parliamentary democracy after the collapse of the communist regime, a re-nationalisation trend was actively launched by the new government in 2010.

In this context, the Hungarian National Asset Management Inc (i.e. Magyar Nemzeti Vagyonkezelő ZRT - MNV)2 played a key role, by managing directly the majority of PSHs in sectors labelled as “strategic” by the government (including energy, automotive, real estate). In 2011, the MNV had a portfolio of 415 state-owned companies (of which 358 directly managed by MNV)3, as detailed in Table 1. In addition, it also directly managed 14% of the state’s real estate properties for an overall value of 31 EUR Bn. Comparing this data with 2017 figures, the number of PSHs sharply increased (+17.1%) greatly due to the rise in the number of operating companies owned by MNV (+59%)4.

Table 1 MNV’s portfolio, 2011 and 2017 State Owned Enterprises Number (2011) Number (2017) A) Operating companies 214 341

- majority owned 124 187

- minority owned 90 154

B) Under voluntary dissolution 60 6

C) Under liquidation 84 67

D) Companies directly managed (Total A+B+C) 358 414

E) Companies managed by other entities (Total) 57 72

Total # of State Owned Company in the MNV's portfolio (D+E) 415 486

Source: KPMG elaborations on MNV’s data.

1 The public bid was announced on 7th November 2011. 2 The MNV was created in 2008 following the merger of three organisations: the State Privatisation and Holding Company (Állami Privatizációs és Vagyonkezelo Rt. - ÁPV Rt.), the Treasury Property Directorate (Kincstári Vagyoni Igazgatósá) and the National Land Fund Management Organisation. It is a PSH controlled by the Ministry of National Development. Its most important tasks are regulated under the rules of the Act CXCVI of 2011 on National Assets. For more details, please see: http://www.mnv.hu/en/hungariannatassetman [Accessed 28th January 2018]. 3 For more details, please see: http://www.icpe.int/old/images/stories/High_Level_Meeting_2011/Countries/Hungarian_State_Holding_Co mpanyGovernance_of_state_ownership.ppt [Accessed 16th January 2018]. 4 For more details, please see: http://www.mnvzrt.hu/felso_menu/tarsasagi_portfolio/mnvportfolio/tarsasagiportfolio/tobbsegi_tulajdonu_t arsasagok [Accessed 16th January 2018]. 3

Study on State asset management in the EU – Pillar 4 Acquisition/entry in capital - Ràba Automotive Holding plc

In Hungary, the automotive sector has historically been impacted by government's decisions, because it has always been seen as a tool for opening up the Hungarian market to foreign investments. In fact, it has always been considered as a priority for all-party governments; it became particularly critical after the early-2000s collapse in the production of 3 national leading automotive companies (Ikarus Busz Kft., and Ràba)5, which had been previously privatised.

In particular Ràba, a Győr-based company6 with around 1,600 people employed in 2016, underwent both a privatisation (in 1992) and a re-nationalisation (in 2011). The Ràba Automotive Holding plc is the holding company of one of the Hungarian automotive groups, whose shares are listed in the . Around 65% of its revenues come from export activities, mainly concentrated into three strategic markets: the European Union, the United States and the CIS Countries78.

2. CONTEXT AND IMPLEMENTATION

In 1990, Hungary became a parliamentary democracy. Private property was enshrined in the Hungarian Constitution. The subsequent privatisation policies adopted by the government brought to the country a record number of private Foreign Direct Investments (FDIs) and coincided with the early accession of Hungary to both the North Atlantic Treaty Organization (NATO) in 1999 and to the European Union in 2004. In the “pro-privatisation phase”, several privatisations (and, just occasionally, re- nationalisations) had taken place – including some companies in the automotive industry (e.g. Ràba, Ikarus Busz). According to the Privatisation Barometer9, 181 public-to-private transactions were made over the 1990-2010 period. The cumulate revenues from privatisations over the 1990-2014 period amounts to 361.4 HUF Bn.

By contrast, the elections of the ’ government in 2010 brought a full-scale reversal in the process, with a partial coming back to the pre-1990s policies. For example, the government adopted a cardinal Law the sectors that, according to the government itself, should be publicly owned (i.e. banking sector, utilities, media and transportation). In addition, companies previously owned by the local government replaced their ownership becoming companies owned by the central government.

The post-2010 period was characterized by a large number of re-nationalisations strongly promoted by the Government and its Prime Minister Viktor Orbán. The stated objective was to correct the privatisation policies led by the previous governments. The strategy of Orbán’s government appears to be grounded on the following two pillars:

 the utility sector was defined as a “natural monopoly” requiring state ownership. In the cases in which utility-related companies had been privatised by the previous governments, they had to be re-nationalised;  other sectors (i.e. banking and telecommunications) were labelled as “strategic”, thus justifying the rise in public ownership and a decrease in the part of shares owned by foreign groups.

5 For more informations, please see: https://www.pism.pl/files/?id_plik=13689 [Accessed 16th January 2017]. 6 Győr is currently one of Hungary’s most important automotive industrial locations with production plants of large automotive companies such as Audi. 7 The Commonwealth of Independent States (CIS) was created in December 1991 and currently includes Azerbaijan, Armenia, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Uzbekistan and Ukraine (see http://www.cis.minsk.by/page.php?id=74) [Accessed 28th January]. 8 KPMG elaborations on Rába annual reports. 9 KPMG elaborations on data from the Fondazione Eni Enrico Mattei (FEEM) database, 1980-2014. 4

Study on State asset management in the EU – Pillar 4 Acquisition/entry in capital - Ràba Automotive Holding plc

The extent of the ongoing Hungarian re-nationalisation campaign is not very easily infered, as the transactions have been carried out by multiple institutions sitting into the Hungarian central government, such as the MNV, the Prime Minister’s Office, and the Hungarian Central ; branches of certain Ministries, some large PSHs, the Capital City of Budapest and other municipal governments.

The re-nationalisation of Rába by MNV was officially justified by the Hungarian government as a way to safeguard a domestic automotive industry, following the collapse of other domestic companies that had been previously privatised and as a potential to produce military vehicles’ components. In addition, Rába has been a key piece of the government’s initiative to reboost production of passenger buses which were important export products of the Hungarian economy during the pre-90’s socialist era. The term business development strategy for the company was supposed to be sustained also thanks to possible joint ventures with other major players operating at both EU and national level.

3. ANALYSIS OF THE DEALS

Since the introduction of Ràba’ shares in the in 1997, the ownership of Ràba had been spread between different owners. In particular, back in December 2010, the ownership structure of Ràba was spread among the following players: DRB Hicom Group (10.85%), and AEGON Zrt (9.12%); domestic corporations (26.37%), foreign corporations (3.55%), private (43.89%), and employees (0.40%). The remaining 6.82% was represented by Ràba’s .10

On 7th November 2011, the MNV made a public bid for the purchase of all shares issued by Ràba. The bid was approved by the Financial Supervision on 8th November 2011.

In order to complete the public takeover bid, the bidder initiated the procedure of the European Commission in order to have its license to move forward with the transaction in accordance with the EU competition law. The European Commission declared the operation as “compatible” with the internal market and with the European Economic Area (EEA) Agreement. This decision was adopted in application of Art. 6(1)(b) of the Merger Regulation11.

The approval of the operation was granted on 18th April 2012, when the MNV completed the acquisition of 9,925,829 shares (73.67% stake) in Ràba for deal value of around 6.3 HUF Bn12. As a result of the bid, the state acquired the control of the company, exceeding 50% stake, and the operation formally concluded with the Hungarian Competition Authority (Gazdasági Versenyhivatal – GVH)13 approving the purchase.

At the same time, in accordance with the Rába Group Management Incentive Programme, the five-year management share option programme for Ràba’s senior and middle management, 43,459 treasury shares were drawn during the first

10 For more information, please see http://www.raba.hu/investment/en.befektetoi.raba.hu/doctar/eves_jelentesek/annual_report_2010_- _eves_jelentes_2010.pdf. [Accessed 27th January 2018] 11 For more information, please Commission Decision of 11/04/2012 declaring a concentration to be compatible with the common market (Case No COMP/M.6479 - MNV / RABA) according to Council Regulation (EC) No 139/2004. Available at: https://publications.europa.eu/en/publication-detail/- /publication/6ef14fc5-9c23-466b-8b82-06f641ed1037/language-en [Accessed 11th January 2017]. 12 KPMG elaborations on data from the Fondazione Eni Enrico Mattei (FEEM) database, 1980-2014. 13 For more information on the GVH please see: http://www.gvh.hu/en/gvh [Accessed 27th January 2018]. 5

Study on State asset management in the EU – Pillar 4 Acquisition/entry in capital - Ràba Automotive Holding plc

three quarters of 2011. In addition, on 6th December 2011, in response to the public takeover bid, 21 shareholders drew down a total of 486,397 shares.

Based on the authorization granted by its Board of Directors, Rába purchased 159,710 treasury shares on the Budapest Stock Exchange.

4. IMPACT ASSESSMENT

In the following section, the potential impacts of the re-nationalisation on the target company performance, on and other impacts are analysed, using publicly available data. These impacts are evaluated specifically in relation to Ràba’s re-nationalisation; hence, no observations are made on the overall impact the nationalisation wave might have had14.

Please note that the analysis of the impacts is mainly based on the comparison between trends and performances registered by both the company and the country before and after the re-nationalisation took place. Therefore, no counterfactual assessment has been carried out, being beyond the scope of this case study, as well as very challenging with respect to the “do-nothing” scenario.

4.1. Impacts on the target company

Regarding the impacts of the re-nationalization of Ràba, we cannot conclude that the effects on both financial and operating performance of the company are significant. Nevertheless, it can be observed that the solvency profile of the company has significantly improved, as it will be explained in the following sub-sections.

 Market positioning

Looking at the market positioning (in terms of operating revenues) of Rába as compared to other, comparable EU companies producing automotive components, the market share of the company has decreased both during the period before and after the takeover bid (Figure 1). Hence, we cannot conclude the re-nationalisation had significant impacts on the market positioning of the company.

Figure 1 Rába’s market share overtime, volume of revenues, EU28 market, 2009 - 2016 ∆ CAGR '09 – '10 '12 – '16 % 9 -11% -5% 8.3 8.2 7.7 7.8 8 7.4 7.1 6.8 7 6.4 6 5 4 3 2 1 0 2009 2010 2011 2012 2013 2014 2015 2016 Takeover Source: KPMG elaborations on information provider database. (a) The re-nationalisation of Rába started in 2011 and was completed in 2012. The 2011 has been considered as the year of reference for the operation in order to examine also possible impacts due to the “announcement“ and to the activities of setting up the operation itself on Ràba’s business. (b) The market share of Rába has been calculated considering the closest 10 listed EU28 companies according the operating revenues among those that produce automotive components.

The same trends can be observed with respect to the market positioning of Rába as compared to its competitors within the domestic market (i.e. the closest 3 Hungarian

14 The impacts are assessed using Raba’s consolidated annual reports and data. 6

Study on State asset management in the EU – Pillar 4 Acquisition/entry in capital - Ràba Automotive Holding plc

companies in terms of operating revenues)15. As Figure 2 shows, the market share of Rába has decreased from 37.1% to 4.2% during the period 2007-2016.

Figure 2 Rába’s market share overtime, volume of revenues, domestic market, 2007 - 2016 CAGR CAGR '07 – '10 '12 – '16 % 40 -13% 37,1 36,5 35 -12% 29,8 30 26,8 27,0 24,7 25,0 25 22,2 20,4 20 15,0 15

10 5 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Takeover Source: KPMG elaborations on Amadeus data (a) The re-nationalisation of Rába started in 2011 and was completed in 2012. We consider 2011 as the year of reference for the re-nationalisation. (b) The market share of Rába has been calculated considering the top 3 Hungarian companies according the operating revenues among the companies that produce automotive components.

By contrast, the attractiveness of Rába within the market has consistently improved after the re-nationalisation. In addition, compared to the ternd in the Budapest Stock Exchange (BUX) Index16, Rába performed better in the period immediately after the re-nationalisation; however, the trend reversed in the following periods (2016 onwards), making it less attractive to investors.

Figure 3 Market price per share of Rába compared to the BUX Index, 2007–2016

Source: KPMG elaborations on information provider database. (a) The re-nationalisation of Rába started in 2011 and was completed in 2012. We consider 2011 as the year of reference for the re-nationalisation. (b) In order to clean data from possible “ effect” that might influence trends and values reported, values have been reported on local (i.e. HUF).

 Profitability

The crisis that hit the global automotive industry reached its peak in the first half of 2009. As a consequence, Rába’s operating revenues sharply declined in 2009. In the

15 Source: KPMG elaborations on Amadeus data 16 BUX Index is a index, which takes into consideration the 25 major Hungarian companies trading on the Budapest Stock Exchange. The evolution of the BUX Index is used as an indicator of the attractiveness of the investors towards the major Hungarian traded companies.

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Study on State asset management in the EU – Pillar 4 Acquisition/entry in capital - Ràba Automotive Holding plc

following years, even after the re-nationalisation, it registered a slight improvement in revenues, which remained quite stable until 2016.

As far as the Net Income is concerned, Rába registered a significant loss in 2008, mainly due to a financial item of extraordinary nature (i.e. loss on derivate transactions). In fact, by “cleaning” the Net Income from the effects of financial items, we can notice that the EBIT registered a better, still negative, result than in the case of the Net Income.

Focusing on profitability indicators, they are all (i.e. Net Income, EBIT, and ROA) relatively stable (and positive) during the years following the re-nationalisation, mainly due to a rise in the level of revenues registered by Rába.

Figure 4 Rába’s Profitability profile, 2007–2016

Operating revenues Net income CAGR CAGR '07 – '10 '12 – '16

Mn HUF Mn GBP +25% -14% CAGR CAGR 2.669 65.000 3.000 '07 – '10 '12 – '16 1.952 59.319 60.396 60.000 2.000 1.414 n.a. 1.378 852 0% 1.000 455 569 55.000 0 50.000 48.147 48.599 46.385 -1.000 -701 -859 45.000 43.231 42.837 41.809 -2.000 40.000 37.898 -3.000 35.000 33.893 -4.000 -5.000 -5.098 0 -6.000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Takeover Takeover EBIT ROA CAGR CAGR '15 – '17 CAGR '12 – '16 +12% Mn HUF '10 – '13 % +26% 4.000 3.563 10 3.113 CAGR 8.1 -31% 8 3.000 2.467 '07 – '10 2.080 5.6 6 4.1 2.000 1.260 1.323 1.510 4 3.3 n.a. 1.019 1.012 1.6 2.4 1.000 2 1.3 0 0 -2 -1.000 -4 -2.2 -2.7 -2.000 -6 -3.000 -8 -10 -4.000 -12 -4.096 -5.000 -14 -12.4 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Takeover Takeover Source: KPMG elaborations on Rába annual reports, Amadeus, and information provider database. n.a. = not applicable (a) The re-nationalisation of Rába started in 2011 and was completed in 2012. We consider 2011 as the year of reference for the re-nationalisation. (b) In order to clean data from possibile “exchange rate effect” that might influence trends and values reported, values have been reported on local currency (i.e. HUF). (c) The ROA has been calculated as the ratio between the Net income and the total assets of Rába. (d) For years 2015 and 2016 EBIT does not take into account interest received values, since they are not available (e) The annual reports of Rába do not report the values of the interests and received for the years 2015 and 2016. Therefore, EBIT do not take into account these values for these years.

 Efficiency

Despite the stable level of revenues between 2007 and 2016, the company has succeeded in improving it own efficiency thanks to a reduction in the main costs items.

In particular, towards the end of 2008, Rába took several measures aimed at efficiently tackling human resource issues generated by the fall in the volume of orders due to the economic crisis. During 2009, after workers under mobility scheme had face redundancy, Rába introduced both “-weeks” (mostly four-day working weeks), and longer periods of temporary stops. In doing so, Rába took advantage of the workplace protection support schemes provided by the government. As a result, Rába managed to save long-term job with no need of shutting down operations.

Since 2011, Rába was successful in maintaining a quite positive trend in terms of cost on revenues due to a slight decrease in costs and a stable trend of revenues. In detail, looking at the main cost items, the material costs on revenues registered a decrease (from 63.3% to 58.6%), whereas staff costs remained stable, as shown in Figure 5.

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Study on State asset management in the EU – Pillar 4 Acquisition/entry in capital - Ràba Automotive Holding plc

Figure 5 Efficiency profile of Rába, 2007 – 2016

EBITDA Material cost as % of operating CAGR revenues '15 – '17 CAGR CAGR +4% '12 – '16 % CAGR % '07 – '10 12 '10 – '13 11.4 80 -2% -1% +6% 63.6 64.1 65.2 10 9.6 9.6 61.7 63.1 63.3 61.4 9.3 9.2 58.3 60.7 58.6 8.5 60 8.2 8.1 8 6.9 6.7 6 40

4 20 2

0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Takeover Takeover CAGR Cost of employees as % of '07 – '10 operating revenues CAGR '12 – '16 % +2% 19.9 0% 20 18.6 18.1 18.1 18 17.5 17.6 17.3 17.0 16.3 16.3 16 14 12 10 8 6 4 2 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Takeover Source: KPMG elaborations on Rába annual reports, Amadeus, and information provider database. n.a. = not applicable (a) The re-nationalisation of Rába started in 2011 and was completed in 2012. We consider 2011 as the year of reference for the re-nationalisation.

 Solvency

Overall, the debt portfolio of Rába Group has been reduced during the entire period under observation. On the other hand, following the re-nationalisation of the company by means of a public takeover bid, the company has constantly increased its equity. This is mainly because of the positive value of the Net Income registered since 2011, following a period of losses (between 2008 and 2010).

The debt to equity ratio of Rába has declined after the re-nationalisation, implying that the company’s leverage has overall improved. In fact, the lower debt compared to the equity means that Rába is using less leverage and has a stronger equity position. Likewise, since the asset-based solvency ratio improved, Rába’s capacity to stay afloat has improved as well. In light of all these observations, the solvency profile of Rába would seem to have benefited from the re-nationalisation process. Nevertheless, looking also at the evidence reported on revenues and net income trends, it is possible to hypnotise that the improvement registered in the solvency profile of Rába might also be related to the general improvement of the economy after the crisis rather than to re-nationalisation.

Figure 5 Solvency profile of Rába, 2007 – 2016

CAGR Equity '07 – '10 Total debt CAGR Mn HUF -5% '12 – '16 CAGR CAGR Mn HUF 20.000 18.679 29.545 '12 – '16 '07 – '10 +13% 30.000 18.000 16.896 17.107 -16% 27.500 25.609 25.786 -11% 16.000 15.075 25.000 23.521 14.076 21.983 14.000 22.500 21.677 21.177 12.000 11.500 11.383 20.000 19.054 10.746 17.472 10.059 9.991 17.500 10.000 14.823 15.000 8.000 12.500 6.000 10.000 4.000 7.500 2.000 5.000 2.500 0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Takeover Takeover Debt to equity ratio Asset-based solvency ratio CAGR +13% '12 – '16 3.0 60 CAGR +14% 55.8 2.6 2.6 55 CAGR '07 – '10 49.5 2.5 50 2.2 '12 – '16 2.1 45 -8% 42.5 2.0 39.8 41.6 2.0 -21% 40 1.5 35 33.1 31.4 32.6 1.4 1.5 1.4 30 28.0 27.9 1.0 25 1.0 0.8 20 15 0.5 10 5 0.0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Takeover Takeover Source: KPMG elaborations on Rába annual reports, Amadeus, and information provider database. n.a. = not applicable (a) The re-nationalisation of Rába started in 2011 and was completed in 2012. We consider 2011 as the year of reference for the re-nationalisation.

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Study on State asset management in the EU – Pillar 4 Acquisition/entry in capital - Ràba Automotive Holding plc

(b) In order to clean data from possible “exchange rate effect” that might influence trends and values reported, values have been reported on local currency (i.e. HUF). (c) The Total debt of Rába includes Current and Non-current liabilities. (d) The Equity refers to the amount of equity that belongs to the shareholders (i.e. the Shareholders' funds). (e) The asset-based solvency ratio has been calculated as the ratio between the Equity and the Total assets of Rába.

4.2. Impacts on public finance

In this section, we tentatively address one of the most important issues in state asset management, i.e. the impact of the re-nationalisation of the target company on the country’s public finance.

The main impact of Ràba’s re-nationalisation on the Hungarian government’s public finance can be identified in the cash outflow registered (between 2011 and 2012) after the government re-acquired 73.67% stake by private investors (for a value of around 6.3 HUF Bn, equivalent to the 0.02% of Hungarian GDP of 201117) through MNV (company fully owned by the Hungarian central government). However, from a national accounts perspective, this was a financial transaction without an impact on government’s expenditure and deficit.  Dividends

According to Ràba’s annual reports, the company both in the period under private ownership (2007 to 2011) and in the post-renationalisation period never paid any dividends to its shareholders; also, there is no sign that this policy would change in the short-term. Therefore, we cannot conclude that the re-nationalisation had significant impacts on central government’s proceeds.

 Government debt

Since the re-nationalisation of the company was carried out through the MNV, debt and assets associated to Ràba are included in MNV’s accounts. More in detail, the MNV has recognised 73.68% of the total debt and assets in its accounts starting from 2012. For example, MNV recognised total liabilities for 17.3 Mn HUF and total assets for 27.7 Mn HUF in its accounts in 2012.

It is also necessary to consider that, being the MNV part of central government, its balance items are consolidated within the Hungarian government’s . Nevertheless, the acquisition of Ràba does not directly add to the Hungarian government’s debt (with the registration of Ràba’s liabilities), because Ràba is not reclassified inside government.

4.3. Other impacts

The re-nationalisation of Ràba might also had some impacts on people involved in the corporate and ownership transformation. In fact, a nationalization or a privatisation of a company operating in an important sector of the economy might have the effect of increasing or lowering the price of the services/products provided to the clients/citiziens; as well as, potentially, changing the quality of those services/products. In addition, a nationalization or a privatisation might also have an impact on the number of employees of the target company. In the case of Ràba we cannot conclude that the re-nationalisation has had a significant impact on customers or on emplooyees for the below mentioned reasons.

17 In 2011 the Hungarian GDP was worth 28,304.94 HUF Bn. For more information please see: http://appsso.eurostat.ec.europa.eu/nui/submitViewTableAction.do. [Accessed 30th January 2018]

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Study on State asset management in the EU – Pillar 4 Acquisition/entry in capital - Ràba Automotive Holding plc

 Customer–oriented indicators

As far as the quality of services provided is concerned, over the period analysed, both the ISO/TS 16949 standard and other specific standards were implemented and improved by the ISO Council and by the International Automotive Task Force (IATF) in order to uniform standards for automotive sectors at global level. The quality of services given to customers became increasingly important for all the automotive companies, including Rába, in order to guarantee their persistence in the market. For this reason, it is not possible to directly infer the impacts of the re-nationalisation on the services provided by Rába to its end-customers. In fact, Rába has been forced to maintain a certain quality of services independently of its ownership.

 Workforce

The number of Ràba’s employees has remained quite stable in the last eight-year period. Analising the main trends pre- and post re-nationalisation, it is possible to infer a decrease in the number of employees since 2010 (with the only exception being a slight rise in 2013). For this reason, it not possible to conclude that the re- nationalisation of Rába was responsible for the decreasing trend in the number of employees, since this has started earlier.

Table 2 provides a synthesis of the major impacts briefly described above. The results are presented by means of a RAGS (i.e. Red; Amber; Green; Silver) classification. In detail: “Red” stands for a negative impact, “Amber” for no clear patterns for the impacts, “Green” stands for a positive impact/s and “Silver” stands for no data available for the analysis. As already mentioned, this analysis is only based on the comparison between trends and performances registered by both the company and the country before and after the operation took place. In fact, it is difficult (as well as beyond the scope of this case study) to track back impacts.

Table 2 Summary table of potential impacts

Summary of potential impacts

Impacts on the target company

Scoring . Looking at the market positioning of Rába over other comparable EU and national companies in terms of operating revenues, Market positioning the market share of the company has decreased during both the period before and A after the takeover bid. We cannot therefore conclude the re-nationalisation of the company had a significant impact on the market positioning of the company

Scoring The main impacts on profitability during the Profitability period between 2007 and 2016 are mainly due to the global financial crisis of the A automotive sector. Since 2011 the profitability remain at a stable positive level due to the rise of revenues, caused by a

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Study on State asset management in the EU – Pillar 4 Acquisition/entry in capital - Ràba Automotive Holding plc

Summary of potential impacts general recovery of the economy.

Scoring Efficiency . Since Rába had a semi-fixed cost structure and increasing revenues, the nationalisation A appears to have no significant effects on the company. Scoring . Following the re-nationalisation of the company by means of a public takeover bid, the company has constantly increased its Solvency equity position. On the other hand, the total A debt of Ràba has decreased. As a result, the solvency profile of Ràba has improved but this might be mainly due to the general recovery of the Hungarian economy.

Impacts on public finance

Scoring . The impact of Ràba’s re-nationalisation can be identified in the cash outflow connected Fiscal impacts with the re-acquisition of the company. A However, since the takeover occurred as a financial transaction, it has no relevant impact on government expenditure. Other impacts

Scoring

. Due to a lack of specific informations on the Impacts on quality of services or on price level pre and customers/clients S post re-nationalisation, we cannot conclude that the operation has had a particular effect on the issue.

Scoring . It is possible to see a decreasing trend in the Impacts on Ràba’s number of employees since 2010. Therefore, workforce A it is not possible to conclude that Rába’s re- nationalisation had a significant effect on the number of employees.

Legend

R = Negative impact A = No clear pattern G = Positive impact S = No data available

Source: KPMG elaborations

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Study on State asset management in the EU – Pillar 4 Acquisition/entry in capital - Ràba Automotive Holding plc

5. CONCLUSIONS AND LESSONS LEARNT

This case study represents an example of the re-nationalisation process that took place in Hungary post 2010. The main selected conclusions and lessons learnt can be summarised as follows:

 state ownership has always played an important role in the Hungarian economy;

 as a consequence of the government policies, the MNV sharply increased its portfolio, acquiring shares in many companies such as Ràba;

 the attractiveness of Rába on the equity market has constantly improved following the 2011 re-nationalisation and, compared to the evolution of the Budapest Stock Exchange (BUX) Index, Rába performed better in the period immediately after the re-nationalisation;

 the re-nationalisation process did not have relevant impacts on the company’s financial results. This means that Rába’s financial results have been mainly driven by the economic conjuncture, rather than by the changes in ownership (public to private, and then private to partially public);

 the impact of the re-nationalisation of Ràba on the Hungarian government’s public can be identified only in terms of cash outflow associated with re-acquiring the stake; the company never paid any dividends to its shareholders neither in the pre-renationalisation period nor in the post- renationalisation period.

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