The oil company MOL (Hungarian Oil and Gas), which has hydrocarbon production assets in Russia, is the shareholder that, through a long chain of control, manages 55% of the consortium that has launched a takeover bid for Talgo. The other 45% belongs to the state fund Corvinus, which gives Viktor Orbán’s government influence in the operation.
The Minister of Transport, Óscar Puente, assured this week that the Government will do everything possible to prevent the Hungarian operation due to possible connections with Russian capital, without giving more details. Yesterday, when publishing its proposed takeover of 619 million for Talgo, the Ganz-Mavag consortium offered a long and convoluted description of the chain of control that supports the offer, made up of companies based in Hungary.
There are six companies involved before reaching MOL, but the labyrinth of participations has the oil company as the only way out. 55% of the consortium belongs to Ganz-Mav Holding, 100% owned by Magyar Vagon, whose two 50% shareholders are Magyar Vagon Invest and Solvia Industrial, both 100% controlled by the Solva II venture capital fund, whose shareholder to the Hungarian millionaire Csaba Toro and which is under the management of Lead Ventures, wholly owned by the oil company MOL.
MOL reports in its 2023 accounts that it has 51% of a company called Baitex that produces the equivalent of 3,800 barrels of oil per day in Russia, which is 1.3 million per year. The current price of oil is at $83.
The Hungarian oil company entered Russia in 2006 by acquiring 100% of Baitex. In 2014, it sold 49% to Turkish Petroleum, but the company continues to consolidate in its accounts by having the majority of the capital and by acting as operator in the projects. Baitex is based in Moscow, has 150 employees and has reserves of 28 million barrels, according to MOL on its own website.
After the invasion of Ukraine, the EU vetoed Russian gas, but not oil. However, Spanish energy companies broke their relationship with Russia.
MOL Chairman and CEO Zsolt Hernádi is Chairman of the Hungarian National Competitiveness Council, according to investor services platform MarketScreener. In any case, the Hungarian consortium assures in the Talgo takeover document that MOL has no public participation.
Businessman András Tombor, who was in charge of contacts with Talgo at the end of 2022 to buy the company, now appears in a secondary role in the Hungarian consortium, as a member of the board of directors. Tombor is credited with a close relationship with Orbán.
The other 45% of the consortium that launched the takeover bid belongs to the state fund Corvinus, managed by the Hungarian Ministry of Economy. Founded in 1997, its recent strategy involves supporting Hungarian investors outside the country.
In the information sent to the CNMV, the bidders also implicitly acknowledge that they have not closed an agreement with Talgo’s creditor banks regarding the clause that allows the loans to be canceled in the event of a change of control in the company.
A few days ago, the consortium reported that this aspect was the main uncertainty raised by the CNMV for the launch of the offer. There are Talgo loans for around 300 million euros with several entities, including Santander, BBVA and CaixaBank, whose conditions may vary if there is a takeover bid.
The Spanish company, whose board of directors supports the takeover bid, undertakes to collaborate with the consortium “so that Talgo and its subsidiaries obtain the corresponding consents to the change of control resulting from the offer by the financing entities of the corresponding financing contracts and lines of guarantees of the Talgo group with a change of control clause”.
“If necessary”, Talgo also undertakes to “support the offeror in the search for a financing package that can replace those financing and lines of guarantees that could be resolved.” It does not quantify the volume of these credits at risk of cancellation.
The takeover has the support of the main shareholders, but needs the approval of the Government to prosper, in accordance with the anti-takeover shield put in place during the pandemic. Sources from the Executive assure that “it will analyze all the details of the operation on Talgo”, that it “operates in a strategic sector” and that it has “a fundamental role in railway mobility.”
They say that the Government is going to “defend” strategic industrial projects and jobs, but they recognize that a “balance must also be maintained” so that the country “continues to be attractive as an investment destination.” “The Government works in turn to guarantee the future stability of Talgo,” they add.
