This text was translated from the Spanish original and edited for clarity.
Last week, the board rejected your proposal for industrial integration with Talgo. Are you planning to make a cash offer that competes with the offer from Ganz-MÁVAG?
Our plan is based on extensive understanding of Talgo’s situation over the past few years. We want to embark on a long-term project with them to create a European leader in the railway sector. Škoda and Talgo are highly compatible in terms of products, markets and technology.
When you mention Talgo’s situation, do you mean that Škoda can provide production capacity to expand the portfolio of contracts?
Recently, we invested more than EUR 300 million in strengthening our factories. We started four years ago with an annual turnover of EUR 300 million, which has now risen to EUR 1.4 billion.
A takeover bid (by Ganz-MÁVAG) has been registered since March, and the Talgo board has indicated its preference for it. Are you prepared to launch a cash offer?
We are surprised that our offer wasn’t given due consideration. First, I assure you that our approach to Talgo presents no legal obstacles. Second, we can offer a more detailed proposal once we have evaluated the company.
Could a more detailed proposal include a cash bid?
We’ll consider that option once we have some detailed information about Talgo. Our approach takes into account the perspectives of all shareholders, and we aren’t looking to gain anything for free. We’re an active investment group, but what matters most is our long-term industrial vision. This isn’t about what money can buy but the value we can create.
Are Škoda’s options dependent on the Spanish government vetoing the Ganz-MÁVAG takeover bid, or could we see a takeover battle?
Our project is independent of the Spanish government’s actions. This is a matter between companies, and it involves sitting down with the Talgo board to discuss products, technology and markets. Our advantage is in our capability and ambition to create a European giant that covers propulsion systems, light and commuter trains, electric buses, signalling systems, and Talgo’s major strengths in high-speed rail. Škoda has the capacity to perform critical processes from Talgo’s perspective, such as aluminium and steel welding, which takes years to develop. We also have approvals in demanding markets such as Germany, where we employ hundreds of people. In Finland, we have a team of 800 employees producing structures for trains and trams through an investment of EUR 150 million in Škoda Transtech. In Italy, another of our key markets, we’ve entered a major contract with Trenitalia to supply wagons, and we’re also manufacturing trams for Bergamo and 112 trolleybuses for Genoa.
Where do you see the greatest opportunities with Talgo?
Many countries have developed plans for high-speed rail, but the most immediate demand comes from the European Rail Baltica project, where we already have positions to equip commuter lines that would connect with the new infrastructure. There are also opportunities in the Czech Republic, Slovakia, Bulgaria and Romania. We’re confident in our capabilities and believe we can offer support in all these geographies.
Your company lacks experience in high-speed rail. Would you be entering that field if you weren’t able to integrate with Talgo?
We aren’t planning to enter high-speed rail alone.
Are you collaborating with the Spanish Government? Have you informed the authorities in this country about your project?
Our offer has been communicated to Talgo’s board and shareholders. As I’ve mentioned, it is a negotiation between two companies. Our approach takes the shareholders’ perspectives into view, we aren’t looking for anything for free.
Are there any politics behind it?
Škoda, Talgo and other key players in the sector are part of a critical industry that attracts significant investments. Regardless of the country, governments are always interested in these types of business. We operate in more than twenty markets, and it is absolutely normal to maintain good relations with governments.
After initially being refused, are you confident that Talgo’s board will let you examine the company’s books and conduct due diligence?
I’m absolutely convinced. Talgo will be able to appreciate the benefits of our proposal. We’ve decided to maintain communication with the company and will do so through a letter that we’ll be sending to its CEO. We’re insisting on opening a dialogue and will explain the project’s benefits to various shareholders whose interests may not necessarily align. Finally, how employees and other actors in Talgo’s environment, such as Renfe railway company, see it is important.
Have you contacted Spanish investors who could join your plan, such as Criteria Caixa?
We are aware of Criteria Caixa but aren’t planning to collaborate with them at this time. We’re learning about their interests through the press.
Do you consider Ganz-MÁVAG’s offer of 619 million euros an accurate valuation for Talgo, or do you find it excessive?
I won’t comment on the offer from another market player. It’s important to remember that we don’t know the details of their proposal.
In Spain, there have been reports that your company lacks financial capacity and is for sale through a mandate to JP Morgan. Is that correct? Has the company been offered to the Hungarian company Magyar Vagon, part of the consortium that made the takeover bid for Talgo?
I categorically deny all these claims. Škoda is not for sale, and JP Morgan has no mandate regarding this. Our owner, PPF Group, is committed to us for the long term. Concerning our financial situation, we benefit from the strength of PPF, which has assets exceeding EUR 40 billion and an annual profit of EUR 1.45 billion. We have grown from a turnover of EUR 300 million to over EUR 1.4 billion in four years. This period, despite the impact of Covid and supply chain crises on the entire industry, motivated us to focus on strengthening efficiency. In the first half of 2024, we secured EUR 800 million in new contracts, EUR 670 million in revenue, and posted a positive EBITDA of EUR 14 million. These figures speak of a clear performance improvement.
Škoda Transportation, the division of the group dedicated to producing trains and buses, has declared a negative net result for several years. Do you expect to reverse this situation in the short term?
We aren’t the only company affected by recent unexpected events, but Škoda has continued to grow. Our plan is to stabilise profits in the short to medium term.
Can Talgo workers be assured in the event of potential integration, or should they fear job cuts for the sake of synergies?
They shouldn’t be concerned. The two companies are complementary in products and markets and could benefit from savings due to greater economies of scale.
At what capacity are your factories currently operating?
Our annual capacity is seven million hours distributed across seven plants—five in the Czech Republic, one in Finland, and one in Turkey. We have a total production surface area of 300,000 square metres. Over the last decade, we’ve developed critical processes for Talgo, such as steel and aluminium welding and quality testing. As for train maintenance services, Talgo is a main reference point for us.
The Turkish plant is for bus production. How can it contribute to Talgo’s needs?
The plant has ample capacity and can be adapted to railway production need.
Protecting the manufacturer’s patents while also being listed in Spain is crucial for the government. How do you plan to address this?
Our approach is straightforward and transparent. Both issues are important, and Talgo, which is rightfully considered an iconic company, would continue to be listed in Madrid. We would preserve jobs and pay taxes in Spain. Škoda, Talgo and other leading industry players are part of a critical sector, and government interest is to be expected.
Can you provide an investment figure for the industrial plan with Talgo?
As someone in this industry, I would have to evaluate the specific needs first. However, I can highlight our recent EUR 300 million investment to strengthen our factories and the EUR 85 million we allocate annually to research and development.
Five years ago, you weren’t leading the company, but Škoda had already approached Talgo.
I’ve reviewed the documents highlighting the complementarity of both companies, and it seems that there was indeed contact.
Source: https://cincodias.elpais.com/companias/2024-08-06/petr-novotny-skoda-evaluaremos-la-opcion-de-una-oferta-por-talgo-cuando-tengamos-informacion-detallada.html
Author: Javier Fernández Magariño
