The Hungarian consortium Ganz-Mavag has taken the step of presenting its long-awaited takeover bid (takeover bid) for the train manufacturer Talgo before the National Stock Market Commission (CNMV). The purchase attempt is for 100% (123.8 million shares) and so far it has created nothing but suspicion in the Government. In the environment of the president, Pedro Sánchez, possible links are being analyzed between the man who leads the takeover bid, the Magyar businessman András Tombor, with the Hungarian Prime Minister Víktor Orban, for whom he was national security advisor during his first term, or even with the Russian leader Vladimir Putin. The Minister of Transport, Óscar Puente, stated yesterday before a group of journalists that the Executive will do “everything possible” to prevent Magyar Vagon, a firm owned by Tombor, from taking control of Talgo.
The strong point of the takeover bid, at 5 euros per share, is having the approval of the participants in the Pegaso instrumental company, holder of 40% of Talgo's capital and willing to sell, as explained in the document published in the CNMV portal. Ganz-Mavag recognizes that the success of his offensive depends on the approval of the Council of Ministers and the European Commission, in the latter case for a matter of defense of competition. The purchasing party tries to allay fears and affirms that its intention is for Talgo to continue trading in Spain, in addition to maintaining its headquarters and activities here.
Government sources explain that “all the details of the Talgo operation will be analyzed.” The argument is that it acts in a strategic sector “that plays a fundamental role in rail mobility, and we will always defend strategic industrial projects and jobs.” The same sources recall that Spain has “a framework reinforced last year for the analysis and control of investments, guaranteeing that operations do not affect Spain's interests in matters of health, security and public order, and that it seeks to maintain balance to remain attractive as an investment destination.” With the Hungarian project already on the table, the Executive says it is working “to guarantee the future stability of Talgo. And that means being vigilant in the face of this operation.”
The Foreign Investment Board is the inter-ministerial body, attached to the Secretary of State for Commerce, that analyzes the implications of investments from abroad, such as this takeover bid for Talgo. This entity is chaired by Alicia Varela Donoso, general director of International Trade and Investments.
The offer values the iconic train manufacturer, specialized in the high-speed segment, at 619 million euros and is subject to acceptance by 50% of the capital. The movement takes firmness, after weeks of negotiation between the purchasing party and Talgo's creditors: 18 banks have the capacity to demand early repayment of loans for 227 million if there is a change of control. Once the ground on which Magyar Vagon and its traveling companion, the Hungarian sovereign fund Corvinus, are standing (they share 55% and 45% of the consortium launching the takeover bid, respectively), the progress of the operation now depends on the approval of the CNMV to the prospectus, and that the Government does not stop the entry of foreign capital into Talgo.
“The offeror will begin the process of requesting authorization from the competent authorities as soon as possible after the publication of this announcement. [por el enviado esta tarde a la CNMV] and in collaboration with said authorities [en referencia al Gobierno español]”, can be read in the document that makes the launch of the takeover official. The Council of Ministers could have veto power under the anti-takeover shield from abroad, regulated through royal decree 571/2023, of July 4, on foreign investments. This shield was activated in the early days of the pandemic, and later expanded, due to the loss of value of important listed companies, with which the Executive can close the entry door by taking 10% of the capital. But it also protects unlisted companies in operations exceeding 500 million.
The company intended by Magyar Vagon has 82 years of history and factories in Las Matas (Madrid) and Rivabellosa (Álava). Its market capitalization is 553 million and it earned 12.2 million at the end of 2023. The price rose again this Thursday, rising 5.28%, to 4.39 euros. Thus, the takeover still offers a premium of 13.9% with its 5 euros. The offeror highlights the 14.4% premium over the 4.37 euros that Talgo's share was trading on February 7, when trading was suspended due to press reports that spoke of the preparation of the offer; a premium of 27.7% compared to the value on November 15, 2023, the day before Talgo revealed the potential interest of an investor; and reaches 35.7% over the average price of 3.68 euros corresponding to the month prior to November 15.
Talgo's board of directors will wait to see the offer prospectus “to analyze it in detail based on four basic and essential issues: preserving employment and industrial capacity in Spain; maintain the headquarters and management of Talgo in Spain; retain ownership of Patentes Talgo, SLU over the intellectual property rights and patents, and achieve the best option for all shareholders and other interest groups,” the company reacted in the showcase.
Lack of volume
The small size of Talgo to compete for train orders from references such as the French Alstom, the Swiss Stadler, the Chinese CRRC or the Spanish CAF, requires an industrial boost for a company that, in addition to growing at high speed, wants to develop in the light rolling stock business. All in all, Talgo has orders in its portfolio for 4.2 billion, of which 2.1 billion were contracted last year.
Added to the need to gain production capacity is the desire for the exit of one of the shareholders with a financial profile, the Trilantic fund. Main member of the Pegaso instrumental company, owner of 40% of Talgo, the sale of shares by Trilantic drags its other two partners: the founding family Oriol and Torreal, Juan Abelló's investment vehicle. This core of shareholders have already expressed to the Talgo board their intention to accept the takeover bid with all their shares. Other investors are the Torrente Blasco family, with 5.03% through the Torreblas instrumental company, and the insurance company Santa Lucía with 2.86%. Another 3.5% of the company is distributed among the board members.
Magyar Vagon's approach to Talgo is considered friendly because it was announced to the manufacturer's board of directors and even has the approval of the reference shareholders.
The Government's concern about this case occurs after the entry last September, without prior notice, of the Saudi STC in Telefónica with 9.9% between capital and derivatives. Playing on the defensive, the State Society of Industrial Participations (SEPI) received permission from the Council of Ministers to acquire 10% of Telefónica, while a digital SEPI is being created as a vehicle that could take the role of reference shareholder in Telephone.
The industrial meaning of the takeover bid is to provide greater capacity to the Hungarian manufacturer DJJ (Dunakeszi Jarmüjavító), owned by Magyar Vagon, specialized in light and freight trains with its plant in Dunakeszi (Hungary). Tombor bought this company in 2020, from Russian hands, within the framework of the Russian invasion of Ukraine. The Spanish brand would be maintained, as well as its two plants in Spain. A larger size for both manufacturers would give them a better position regarding the planned investment in railways throughout Europe. Magyar Vagon has stated before the CNMV that it is looking for an industrial combination “that creates value for Talgo at a European level.”
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