European stock market regulator investigates Skoda for market manipulation after Talgo bid

The European securities regulator (ESMA) is set to launch an investigation into whether the offer made by Czech group Škoda to the board of directors of Talgo could breach European securities market rules by not following the rules on takeover bids and could constitute a case of abuse or even market manipulation. In July last year, Škoda sent a letter to Talgo stating that “open a dialogue” to explore the possibility of a merger between the two companies that would allow them to combine their businesses, is refusing the opportunity to launch a counter-takeover bid for the Spanish manufacturer, as requested by the current shareholders and the CNMV stock market regulator, which has come out in defence of the Hungarian consortium Ganz-MaVag that formulated it.

On August 6, the Spanish Association of Minority Shareholders of Listed Companies (Aemec) reported the proposal to the European Securities Market Regulator, which, through its actions, may hinder the free formation of prices in the market. Aemec asked ESMA to “issue guidelines and recommendations to help protect market participants, investors and consumers as a guarantee of the public interest in the proper functioning of markets.” With this in mind, ESMA said it would conduct “an analysis of the facts to determine whether there is (or is not) non-compliance with European law, as well as its extent, in order to be able to take appropriate measures.”

According to Aemec, the “rescue operation” presented by Škoda is aimed at circumventing the requirements set out in the takeover bid rules to present a competing corporate operation and to propose a “combination of business and industrial integration” without presenting any economic proposals on the part of Talgo shares and the entire Spanish company. That Škoda is publicly showing that it is not interested in taking control of Talgo is one of the legal formulas by which you must obtain an exemption from the stock market regulator, This would allow the government to prevent the company from being taken over by the Hungarians, as Minister Oscar Puente privately acknowledged and other Moncloa members hinted at.”Our main goal is not to gain control over Talgo. We also do not intend to privatize the company.therefore, we are not considering the possibility of placing an offer for its shares,” Skoda CEO Petr Novotny explained in a letter. The Czech company considers its offer “serious and legal” and assures that in relation to the due diligence it intends to carry out, “nothing prevents” Talgo’s Board of Directors from opening its books despite the fact that a takeover bid is currently underway, although they admit that it is within their power to “promote these alternatives or not.”

Contrary to what the Czech company did, on April 4, the Hungarian investment group Ganz-MaVag Europe (Magyar Vagon) formulated a voluntary public offer to acquire 100% of the capital of the Spanish train manufacturer Talgo in exchange for 619.3 million euros. The Magyar group has submitted a prospectus with the terms of the purchase just four weeks after announcing its intention to file a takeover bid with the National Securities Market Commission (CNMV).