Talgo may have to return to a previous offer from Skoda despite only recently rejecting it. Credit: Iñaki Berasaluce/Europa Press via Getty Images

Hungarian manufacturer Ganz-Mavag has withdrawn its acquisition offer for Spanish rolling stock company Talgo after the government of Spain blocked the deal over national security concerns. 

Spain’s Council of Ministers agreed not to authorise the foreign direct investment after analysis by the Foreign Investment Board that found the deal would “entail risks to guarantee national security and public order”. 

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The decision means that Talgo will now have to find an alternative buyer for its company, despite only recently rejecting an offer from Czech engineering company Skoda Group after deeming it was not competitive to Ganz-Mavag’s proposal. 

The government’s opposition to the Hungarian business’ acquisition of Talgo was long known by the company and stemmed from Ganz-Mavag’s suspected links to Russia through its part ownership by Hungary’s state investment fund. 

Skoda’s offer, while smaller than Ganz-Mavag’s €619m ($686m) proposal, had therefore reportedly been selected by the government as a safer alternative for Talgo, which it deemed a “strategic company” due to its access to information on Spain’s rail network. 

While the Spanish rolling stock manufacturer will be aware of the poor optics of now returning to Skoda, the Czech company had said it would maintain a dialogue with Talgo even after the rejection of its offer, likely bolstered by the knowledge of the government’s support. 

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However, Ganz-Mavag said that while it had withdrawn its current offer, it would not rule out a future acquisition of Talgo and would be appealing the government’s decision due to a belief that “there are no well-founded reasons” for the council’s opposition.