PZ Rona Targets $100 Million Successor Hungary Fund

PZ Rona, Hungary’s largest venture capital firm, seeks $100 million (ecu 83 million) for Hungary Venture Fund, LP. The group currently manages The First Hungary Fund, a Dublin-listed vehicle with $122 million in capital, whose 12-year life extends to December 2001.

Managing director Michael Carter, who set up PZ Rona’s London office last year, said substantial opportunities exist for technology investment in Hungary at present as a result of the country’s wealth of technologically sophisticated scientists and engineers and strong entrepreneurial attitudes.

The new fund will focus primarily on technology-driven companies in Hungary, capitalising on the significant experience of PZ Rona’s team in the pharmaceuticals, biotech, telecommunications, computer-related technology and engineering sectors. The Hungary Venture Fund, which will invest across a range of development stages. will acquire control or substantial minority positions in investees, and the PZ Rona team will thereafter work very closely with their management teams to build profit and sales, particularly in international markets.

PZ Rona, which is Jersey-based, and its wholly-owned Hungarian subsidiary Rona & Tarsai, were set up in 1989 to manage The First Hungary Fund. Then capitalised at $80 million, The First Hungary Fund was the first venture fund established in Central Europe, with a remit to invest in both listed and unlisted stocks. In 1991, chairman Peter Rona, who heads the PZ Rona management team, acquired a majority of the management company from the National Bank of Hungary, and in 1994 PZ Rona increased the fund’s capital to $122 million. Since 1991, the fund has made 27 investments totalling $185 million and achieved an average IRR of 29.8% on realisations to date. It currently has $211 million in net assets.

The First Hungary Fund’s largest investments were BRX Research and Development and NABI. The First Hungary Fund first invested in the BRX pharmaceutical research company in 1991. In December 1997, Abbott Laboratories of the US paid $28 million for a 20% stake in the company, which is developing compounds for the treatment of Alzheimer’s and related diseases.

NABI was formed when The First Hungary Fund acquired certain assets from Ikarus, Hungary’s state-owned bus manufacturer, and its US distribution company. NABI has developed into a leading producer of buses for US urban transit with a 12% market share. When NABI listed on the Budapest Stock Exchange last July, The First Hungary Fund’s holding was valued at $62 million, compared with its investment of $13.6 million.

Michael Carter reported that high-profile successes scored by The First Hungary Fund – in particular BRX – have substantially boosted the flow of technology-based investment opportunities presented to PZ Rona. He added that the Hungary Venture Fund’s competitive position would be further strengthened by the fact that, although Hungary has exhibited sound economic growth and is the leading market-oriented economy in Central and Eastern Europe, equity capital for investments in the $3 million to $15 million range the new fund’s target market is currently in short supply. The PZ Rona team comprises 11 professionals with more than 60 years’ experience of private equity and venture investment in Hungary.

PZ Rona is primarily targeting European investors. Because The First Hungary Fund is a quoted “hybrid” fund and the new fund a conventional private equity LP, PZ Rona does not expect a significant proportion of existing participants to reinvest in the new vehicle. Structured as a Jersey limited partnership, the Hungary Venture Fund will have an eight-year life with an option for a two-year extension.