Keys to the assault on Talgo: why it is strategic and who launches the takeover bid

Why is it “strategic”?

The Government has called Talgo “strategic”, so they assure that they will “monitor” the operation. The Executive activates the positions to prevent another foreign company – although in this case it comes from the EU – from controlling a firm in a strategic sector, as they consider the railway sector. Government sources point out that it plays a “fundamental role” in rail mobility, to ensure that it “maintains its industrial project and the jobs” that may be affected with an operation that usually ends in personnel adjustments.

What other systemic companies are there in Spain?

The case of Talgo joins that of other companies considered key to the Spanish economy in the face of the arrival of foreign investors. For example, Telephone, of which the Executive already announced at the end of 2023 that it would acquire up to 10% of its shares through the SEPI (State Industrial Participation Company) to prevent the Saudi firm STC from taking control. Other companies such as Indra or Naturgy are also on the radar; in the latter case, after the Black Rock fund acquired GIP, one of the main shareholders of the energy company.

Why is the OPA distrusted?

The Government views the Hungarian group with suspicion because it is led by Andras Tombor, former Defense Advisor to President Viktor Orban – Putin’s ally – which generates high uncertainty about the origin of the capital and the possible connection with Russia.

Can the Government paralyze the operation?

The Executive has the anti-takeover shield, approved during the pandemic and reinforced last year. This law, similar to that of other European economies, requires permission from the Government when the purchase operation by a foreign investor represents more than 5% of the capital, or 10% if there are interests in Defense.

How much will you pay for Talgo?

The takeover bid launched this Thursday by the Magyar Vagon group on Talgo to take over 100% of its ownership offered 5 euros per share, compared to the 4.40 at which the company closed the session, which represents a premium close to 14 %. That is, it will involve a disbursement of 619 million euros. What’s more, this Friday Talgo is plummeting more than 4% on the stock market, to 4.20 euros per share and moving even further away from the Hungarian group’s offer due to uncertainty regarding the company’s future. For this reason, the shareholders consider that the offer is “economically positive” and are mainly focused on the company maintaining its ‘Spanishness’ after the change of control, sources close to the shareholders acknowledge to Europa Press.

What is the next step?

Now a 30-day period begins in which the Hungarian group will have to convince the Government to authorize the operation, since it has veto power. The Government has already stated that it will use this option to stop the advance of the takeover bid, considering that Talgo “operates in a strategic sector with a fundamental role in railway mobility.”

What financial position is Talgo in?

Currently its level of orders is at historic highs (4.2 billion euros), but the manufacturer is accumulating delays of two years in the delivery of several Avril trains to Renfe. In addition, it has another delivery of 56 trains in Germany for 1.4 billion in the future, the largest contract in its history. A challenge that may be met with more orders from Saudi Arabia, Egypt or Morocco.