The operation of change of control in Talgo It has a target date, not a limit, set in the Government’s calendar: Friday, November 29. A senior official aware of the conversations assures that in this short term, just a month and a half, an offer should be put together for the Spanish-branded train manufacturer. The negotiations, warn the parties involved, are in an initial phase.
The Basque steel group Sidenor On Wednesday, it sent a show of interest to the board of the train manufacturer for “the total or partial acquisition of the share capital of Talgo, SA,” and the Minister of Economy, Carlos Corpo, stated yesterday before the media that the Executive is willing to “accompany and help” to find “a viable long-term solution.” It is taken for granted that the state investment vehicle, for taking a minority stake, would be the State Society of Industrial Participations (SEPI).
The Basque Minister of Industry, Mikel Jauregi, insisted in the same sense of support for Sidenor, as long as Talgo’s roots in the Basque Country are maintained and employment is promoted. And a new support in sight is that of the Government of Cantabria, whose Industry Minister, Eduardo Arasti, expressed yesterday, in statements offered to RTVE, his full support for Sidenor without ruling out financial aid if the operation has an impact on the company’s plant. steel mill in Reinosa. Contacts are open.
Whether the recognized appetite of Sidenor, owned by businessman José Antonio Jainaga and a group of directors, crystallizes, will depend on the audit (due diligence) that he makes about Talgo, for which the council chaired by Carlos de Palacio demands information about the offer to open its books. He acted in the same way when it was the Czech Skoda who knocked on the door in the midst of a takeover bid by the Hungarian consortium Ganz-MaVag, finally blocked by the Government of Pedro Sánchez. Skoda’s plan, for its part, was rejected on several occasions because it did not include cash compensation.
Within Talgo, the scope of Sidenor’s approach is of interest: whether it is a partial purchase or a takeover bid for 100% of the capital. Also if this would be formulated in cash and the identity of the buyers, transcending until now the authorship of the steel company alone.
Yesterday, with Corp’s statements, the possibility of SEPI joining Jainaga’s plan gained strength. And in the bedroom is the disposition of CriteriaCaixaexpressed months ago to the Government, to obtain a smaller package accompanying an industrial partner. Until reaching 100% of Talgo’s capital, in the event of a takeover bid, at least one significant investor would be missing, with speculation in the market with the possibility that it would be the Polish train manufacturer Pesa who would ally with Sidenor. Talgo and Pesa signed an agreement at the end of September to explore together the opportunities that are emerging in Eastern Europe in relation to high-speed rail.
In the multi-party conversations in recent days, it is taken for granted that an offer with a leading role from Sidenor would pass the filters of the Government, which monitors the change of control in Talgo by classifying it as a strategic company. Objections from the Competition regulator are not expected either. But the verdict is not so clear in the case of the National Securities Market Commission (CNMV), which admitted the Ganz-MaVag takeover bid to processing in April of 619 million for 100% of Talgo.
The manufacturer’s exit shareholders are the Trilantic fund and the Abelló and Oriol families, adding up to 40% of the capital under the Pegaso instrumentality. Their shareholders agreement requires a joint sale, so an offer for a percentage lower than the 30% that serves as the threshold for a takeover bid would not satisfy their expectations unless said agreement is broken. Until now, Trilantic, the majority in Pegaso, has maintained that it would only consider a 100% takeover bid. Regarding a possible proposal for the 40% held by Pegaso, in which Sidenor, SEPI and Criteria would buy separately, the CNMV could dictate the mandate for a takeover bid upon understanding that there is concertation between the investors.
Despite the calls for caution made yesterday by both Minister Carlos Corpus and the Basque counselor Jauregui, Talgo’s stock has been hot for three days: it rose 4.5% on Tuesday, its value increased 4.9% on Wednesday , and at yesterday’s close Talgo revalued another 5.36%, up to 3.84 euros per share. The last marked price places the market capitalization at 475 million.
Sidenor has been quick to officially declare its interest in Talgo at the height of its value rise. After its letter on Wednesday, the Basque group could defend an offer referenced to Tuesday’s closing price of 3.47 euros, in line with Talgo’s price before Hungarian interest was known in mid-November last year. This price is also more in line with the internal valuations managed by the Government than the 5 euros of the vetoed takeover bid. But the Talgo board counts on the Ganz-MaVag attempt as a market reference and it is foreseeable that it will demand a significant premium.
The union forces are also beginning to move and CC OO Industria is demanding that the strategic nature of Talgo be preserved above the economic interests of the current shareholders. The union requests that any offer be accompanied by an industrial plan for Talgo that guarantees a response to the company’s load of contracts, valued at more than 4,000 million.
It is clear that Sidenor’s industrial profile is liked by administrations. Jainaga adds the support of the governments of Madrid, Vitoria and Cantabria, the latter concerned about the future of the Reinosa forge. It is a location, in the middle of a mountainous area, complicated for the logistics of large steel equipment. The demonstration of the Generalitat of Catalonia is missing, where the steel company also has activity centers.
In addition to the automotive related branch, which concentrates more than 70% of Sidenor’s salesthe group based in Basauri (Vizcaya) seeks to strengthen its presence in the railway field. The Talgo entry would add a substantial workload given that the trains incorporate steel in part of their components (axles, wheels, etc.). When CAF decided to close its steel mill and outsource the activity to third parties, Jainaga offered to supply the steel from Sidenor’s headquarter facilities.
