Hungary supports Talgo purchase through state fund Corvinus

The Hungarian consortium set up to bid for 100% of Talgo is a sum of public and private interests with strong influence from the government of Viktor Orbán. According to interviewed sources, The Magyar Vagon offer, made by investor Andreas Tombor, is backed by the state investment fund Corvinus International Investment, a vehicle created by the Magyar executive to jointly invest in Hungarian and foreign assets, which controls 45% of the consortium. The fund is dependent on the Hungarian Development Bank.

The public and private partners of the Hungarian consortium are willing to pay 632 million euros (five euros per share) to acquire Talgo. one of the largest acquisitions made outside its territory and far from the economic influence of Hungary, historically linked to neighboring countries such as Romania, the Balkans, Austria and other eastern countries, including Russia.

Corvinus is Viktor Orbán’s investment arm in certain strategic assets. In January 2023, Corvinus, together with the local 4iG operator, agreed to buy Vodafone Hungary for $1.7 billion.

The Orbán government also used Corvinus to take control of Budapest Airport, a private facility worth about $4 billion. Hungary has joined forces with the French company Vinci in this operation to purchase the airport owned by the AviAlliance group (52%) and the Canadian PSP fund. The European Commission approved the deal late last year because it did not address competition concerns.

To finance the operation, Corvinus made a number of sales, such as a 15% stake in the Hungarian subsidiary of the Austrian bank Erste Bank.

In addition to businessman Andreas Tombor, the capital of the Hungarian consortium includes the heads of the Hungarian oil company MOL, another parastatal corporation. The oil company is also linked to Tombor and Budapest’s Corvinus University, an institution linked to Fidesz, Viktor Orban’s party. In 2021, the Hungarian government transferred 10% of MOL to the university founded by Andreas Tombor, so that through dividends it could finance its educational activities, as well as other types of investments, such as real estate. The Hungarian consortium includes MOL executives, including production director Gyorgy Bacsa.

Talgo, which was suspended from trading from Thursday to Friday last week, returned to trading yesterday following the explanation Magyar Vagon gave to the CNMV. Shares in the train maker, which rose 9.3% on Thursday due to a pending Hungarian takeover bid, fell on the stock market yesterday, shedding 6.1% to fall to €4.4 per share.

Analysts see Talgo’s fall on the stock market as the lack of attractiveness of Magyar Vagon’s offer and the small number of competitors’ offers. In Spain, the possibility of merging Talgo and CAF to create a national champion has been considered several times.

railway, but the government did not take the initiative to encourage both companies of Basque origin.

Sources close to the Hungarian proposal indicate that interest in Talgo will remain unchanged until progress is made in negotiations with the train manufacturer’s creditor bank. The main obstacle is obtaining the consent of Talgo’s creditor bank, about twenty institutions, mainly Spanish, such as Santander, CaixaBank and BBVA, which maintain credit lines worth about 330 million euros, of which 52 million expire this year.

Another front for the Hungarian investor is the position of the Spanish government, which controls this operation as it is a key asset of the railway industry. it will pass into the hands of a corporation with strong ties to the government of Viktor Orbán.

The Trilantic Foundation is the largest beneficiary of the takeover bid, having remained in capital since 2006. His direct participation increases to 40%. Trilantic controls Talgo through Pegaso, a vehicle that also includes Torreal (the Abello family) and members of the Oriol family, Talgo’s founders.

Spanish-Hungarian summit

Magyar Vagon’s acknowledged interest in a public acquisition offer (takeover offer) at a price of €5 for 100% of Talgo’s capital, which awaits the Hungarian group’s approval of the Spanish company’s financing banks, coincides with the celebration Summit of the Foreign Ministers of Spain and Hungary.

José Manuel Albarez, Minister of Foreign Affairs, EU and Cooperation, meets today at 13:00 at the Vienna Palace, the ministry’s headquarters, with his Hungarian counterpart Péter Szijjártó, Minister of Foreign Affairs and Trade in the government of Viktor Orbán.

The meeting had been planned for several months, and in theory it was not scheduled due to Hungarian interests (a Hungarian state fund owns a 45% stake in Magyar Vagon) in a possible acquisition of the Spanish train manufacturer, but It is inevitable that this issue eludes the conversation between the parties, since Talgo is a company that is considered strategic in Spain due to its close ties with Renfe.

However, high-level negotiations between Spain and Hungary regarding the operation would be logical if it were led by the Ministers of Economy and Finance of both countries, Carlos Cuerpo and Mihaly Varga.