Škoda aims to acquire Talgo along with Criteria without entering into a takeover war | Companies

The Hungarian consortium Ganz Mavag, the author of the public takeover offer (takeover bid) for Talgo on March 7 at a price of 5 euros per share, now has a competitor. The Czech group Škoda Transportation (no relation to Škoda Auto), controlled by the investment giant PPF, also of Czech origin, has offered…

The Hungarian consortium Ganz Mavag, the author of the public takeover offer (takeover bid) for Talgo on March 7 at a price of 5 euros per share, now has a competitor. The Czech group Škoda Transportation (no relation to Škoda Auto), controlled by the investment giant PPF, also of Czech origin, has offered the Spanish manufacturer “a combination of business and industrial integration”, as Talgo admitted yesterday morning before the National Securities Market Commission (CNMV).

As reported by Sinco Diaz, the new bidder’s contacts with the company and the Spanish government have accelerated in recent days, resulting in an expression of interest that currently lacks a cash offer. Sources close to the project say that investment holding company CriteriaCaixa will play a key role, albeit as a minority partner, in the proposal, which is still in the process of being developed.

“In order to be able to assess the next steps, Škoda was asked to provide details of the offer and, in particular, to indicate whether it involves offering the company’s shareholders a consideration higher than that offered by GanzMavag Europe Zrt in the takeover offer announced on 7 March and whether it will be satisfied in cash, as well as to explain its current industrial and financial capabilities,” Talgo said in a statement. Sources close to Škoda’s attempt explain that it has all the signs that it remains an integration offer, not a takeover offer that competes with the Hungarian offer.

CriteriaCaixa was taken over by the government, as was Škoda Transportation, to stop the advance of Ganz Mavag. Both companies say that the consortium talks are awaiting important details, such as the determination of the shares of the conglomerate that will be formed. The chamber includes the specialized defense group Escribano, another investor attracted by the executive power.

The note, signed by Talgo, clearly shows that Skoda requested a monetary offer in addition to the 5 euros that Ganz Mavag was prepared to pay. This was the only way it could open its books for analysis.

The role of the head of Pedro Sánchez was key in finding options for action against Ganz Mavag, the owner of the manufacturer Magyar Vagon. While the Spanish government has demonstrated its direct opposition to the takeover bid, which includes Hungarian state capital through the Corvinus Foundation, the attempt at Czech integration enjoys its blessings. The Council of Ministers has the right to veto a foreign takeover thanks to a shield in force until the end of the year, regulated by Royal Decree 571/2023 of 4 July on foreign investment. This shield was created to prevent foreign capital from approaching companies weakened by the pandemic and the consequences of the Russian invasion of Ukraine. Of course, it is necessary to argue the opposite position, based on a report that the Foreign Investment Council (Jinvex), dependent on the Minister of Trade, has been preparing for several months. There are concerns about possible links between Ganz Mavag and Vladimir Putin’s Russia.

The Ministry of Transport, led by Oscar Puente, has been working in recent months to create an alternative to Talgo, trying to protect its strategic nature and critical technologies. It highlights the flexible track axle, which allows high-speed trains to run on different gauges and therefore cross borders between countries.

The four months during which Ganz Mavag’s offer has been piling up in the CNMV records have put pressure on Škoda to accelerate its emergence; the desire of the main shareholders to sell and Talgo’s urgency to solve the problem of capacity shortages. The core of Talgo is ready to accept 5 euros from the Hungarian side. At least 40% of the capital organized within Pegaso and owned by the Trilantic fund and the Abello and Oriol families is up for sale.

If Czech interest crystallizes, different scenarios could happen. The favorite for the new player is the one from Skoda, who plays alone for Talgo after La Moncloa vetoed Ganz Mavag. The resulting $2 billion listed company would grow in value and power. And this is where Criteria could step in with a minority stake, various sources explain. But the Spanish company’s current shareholders would be diluted and they would have to be patient for their investment to fly away. Talgo seems to prefer the short-term solution presented by Ganz Mavag and its €5 takeover offer if no rival bid emerges.

Industrial potential in development

Last year, 400 vehicles rolled off the Škoda Transportation plants, 88% more than in 2022, and production hours increased by 16% compared to the previous year, to 5.1 million. Investments in R&D last year amounted to 85 million. Its product basket includes electric and hydrogen buses, trams, trolleybuses, electric locomotives and commuter trains. In addition, the company has a division for signalling and solutions for intelligent mobility, as well as digitalisation of vehicle control and diagnostics. But there is no high-speed train here, as in Talgo. The two complement each other, including through markets, and the Czech and Spanish governments maintain good relations.

Škoda Transportation lost 78 million last year, compared to 132 million earned in 2022. Its revenue, on the other hand, increased by 46.5% to 1,136 million. These figures increase if you add the contribution of Temsa, an alliance with the Turkish holding Sabanci for the production of buses.

The strongest industrial centre of the Czech Republic is located in Plzeň, west of Bohemia (Czech Republic). It also has important factories in Ostrava, whose annual capacity is increasing from 50 to 300 machines per year, and in Šumperk, workshops that modernise trains. Outside the Czech Republic, the company operates in Germany, Austria, Slovakia, Italy, Finland, Hungary and Poland. Its machines have been sold in fifty countries with EU quality standards.

Škoda has 7,300 employees compared to Talgo’s 3,300. But the former has an order book worth 3.2 billion, while the Spanish company’s reserve is 4.2 billion. Among Škoda’s largest orders are 370 cars for the Italian company Trenitalia worth 732 million and 200 trams for the city of Prague worth a total of 630 million.

The proposal for concentration came after Škoda invested in the expansion of some of its plants. Plzen was allocated 80 million.

His plan is at odds with Ganz Mavag, which says it has excess capacity in Hungary to ensure Talgo can meet its customers’ needs and raise its revenue above 1 billion euros from 652 million at the end of 2023.

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