(Bloomberg) -- Spain has rejected a bid by Hungary’s Ganz-Mavag Europe Zrt. to buy train maker Talgo SA, saying the proposed deal could have compromised its strategic interests and threatened national security.
The offer presented “insurmountable risks” to public order, the Madrid-based government said in a statement Tuesday. The information portion of a dossier connected to the statement was qualified as classified.
Budapest-based Ganz-Mavag said in a statement that the move was “an arbitrary decision regarding a non-strategic company” which doesn’t have technology that could affect national security.
The ruling ends the Hungarian conglomerate’s controversial bid to take control of the Madrid-based train maker amid opposition from the government led by Prime Minister Pedro Sanchez, which drew attention to its links to Hungary’s nationalist government. Ganz-Mavag is owned by a private equity fund managed by state oil company Mol Nyrt., whose management is allied with Prime Minister Viktor Orban.
The failed deal underscores political tensions within the European Union, which has accused Orban of promoting a culture of cronyism and corruption. For his part the Hungarian premier, whose country currently holds the rotating council presidency of the 27-state bloc, has openly opposed EU aid to Ukraine.
Ganz-Mavag in March offered €5 ($5.58) per share to buy the Spanish firm, valuing it at €619 million. Shares in the Spanish company were temporarily suspended in Madrid on Tuesday, before falling as much as 10.3% in afternoon trading.
Talgo, founded in 1942, has also been approached by the Czech Republic’s Skoda Transportation, which proposed a “business combination” of the two companies that was rejected by the Spanish company’s board.
The train maker is known for its innovative wheel system and tilting mechanism that enables trains to switch track types at high speeds. Its backlog increased by 54% to a record €4.2 billion as of the end of 2023.
Spain passed exceptional regulations in the aftermath of the Covid pandemic that allow the government to block takeovers of local corporations by EU-based foreign ones. These rules are set to expire by year’s end, to align with EU regulations which traditionally demand that members give the same treatment to their own companies and to those from other member states.
--With assistance from Tiago Ramos Alfaro.
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