Hungarian state-owned enterprise acquires Hirtenberger Defence Group

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Wednesday, November 6, 2019 

Hungarian state-owned enterprise HDT Védelmi Ipari Kft. (HDT Limited) has acquired Austrian mortar and shell manufacturer Hirtenberger Defence Group on October 29. Daily newspaper Magyar Nemzet revealed the deal on November 4. Austrian, UK and NZ production sites are to be kept, with hopes that market sales will cover the purchase price in the long run. A government-guaranteed Hungarian Development Bank (HDB) loan covered the costs, with the exact figure is kept secret. The acquisition fits into Hungarian military modernization and capital allocation plans.

The November 4 issue of Magyar Nemzet published an interview with Gáspár Maróth, the Hungarian Government Commissioner Responsible for Defence, Defence Industries and the Coordination of Defence Modernisation, in which the deal was announced. On the same day, the Hirtenberger Defence Group issued a corresponding press release.

According to Maróth, the Hungarian bid won for the company, ahead of other unnamed competitors' offers, following lengthy discussions. He expects no political turmoil between the neighboring Austria and Hungary over the sale.

The Austrian partner asked for the price to be kept secret, but the commissioner revealed that the purchase was financed by an HDB loan, so that it won't be a burden on the state budget. However, the state issued an indemnity bond covering HDT's loans at a value of 38.8 million euro with government decree No. 1430/2019, leading to daily Népszava to cover the story with a headline pointing out that amount as the presumed price. As already queued orders won't leave idle capacity for the coming years, paying back this loan seems realistic to Maróth. Unnamed industry experts called this dubious to Népszava, as the market is saturated and margins are thin, while adding that this kind of equipment is needed by the Defence Forces.

The company structure remains unchanged and all sites continue to operate, but Hungarian engineers are to join the research and development team. Maróth pointed out that it would have been much more costlier to research mortar technology than to acquire it this way. Tamás Tari, Alfahír correspondent theorized that as manufacturing plants are not to be relocated, technology transfer might be the real goal behind the deal.

Népszava underlined that the purchase might be a sign of a future restructuring of military-related companies in Hungary, as it circumvented the Ministry of Defence. HDT Limited was registered on August 6, 2019.

To modernize its military, in 2018 alone, Hungary licensed Czech firearm technology and started assembling firearms in Kiskunfélegyháza, then agreed with Airbus to open a helicopter parts factory as a joint venture in Gyula.

This trend might root in repeated calls by the US to increase NATO members' military spending. According to a March 14, 2019 NATO press release, Hungary spent an estimated 1.15% of its GDP on military expenditures in 2018 - a far cry from the expected and agreed-on 2%. Maróth noted that the military was "effectively disarmed" in 2010, when Viktor Orbán started his second term as prime minister of Hungary.

Sources

• "Press Release" — Hirtenberger Defence Systems, November 4, 2019
• Károly Villányi. "Hungary buys Austrian weapons maker" — rmx.news, November 4, 2019
• Károly Villányi. "Patinás osztrák hadiipari céget vásárolt a magyar állam" — Magyar Nemzet, November 4, 2019 (Hungarian)
• Zoltán Batka, Zsolt Papp. "Orbánék 13 milliárdért vették meg az osztrák fegyvergyárat" — Népszava, November 4, 2019 (Hungarian)
• Tamás Tari. "Ennyiért vehették meg Orbánék az osztrák fegyvergyárat" — Alfahír, November 4, 2019 (Hungarian)
• "1430/2019. (VII. 26.) Korm. határozat [Government decree No. 1430/2019]" — Hungarian Government, July 26, 2019 (Hungarian)
• "Airbus Helicopters and Hungarian Government to establish manufacturing site in Gyula" — Airbus, May 28, 2019
• Michael-Ross Fiorentino. "NATO pledge: Which European countries spend over 2% of GDP on defence?" — Euronews, March 14, 2019
• "Defence Expenditure of NATO Countries (2011-2018)" — NATO, March 14, 2019