Alejandro Goicoechea, the inventor of the Talgo train and a pioneer of high speed rail, is repeatedly cited as the emblem of forward thinking. In a 1975 interview, the octogenarian reflected that Spain has long struggled to embrace innovation and its champions. Now, more than eight decades after that breakthrough, Talgo finds itself facing difficult times even as it remains a symbol of Spanish rail achievement.
Talgo is currently in the spotlight due to a takeover bid led by a semi anonymous Hungarian consortium. Despite finishing 2023 with a record revenue of 652 million euros, a 39 percent rise, and an order book at its peak, the company still struggles with its scale. The Spanish factories, located in Madrid and Álava, are fully productive and there are several contracts on the horizon. Yet the core issue remains size: Talgo’s scale simply does not match the demand of larger competitors.
In comparison, Talgo’s 652 million euro revenue looks modest next to CAF, which reported 3.8 billion euros, and well behind global giants such as Hitachi at 66 billion, CRRC at 32 billion, and Siemens at 56 billion in Europe. France’s Alstom, which acquired Bombardier in 2021, has over 20 billion dollars in revenue. Scale matters because it drives industrial capacity, enables faster project throughput, and helps meet longer and more complex order lead times.
reputation problem
Industry insiders warn that failing to meet international standards can erode trust in future competitions, potentially ending a company’s international prospects. Media closely tied to Talgo acknowledge the need for additional production capacity, and officials admit the company is operating at maximum capacity at two plants. Beyond production constraints, Talgo faces reputational damage from repeated delays delivering high speed trains to state customer Renfe as part of the Avril project, a program that envisioned trains traveling at 330 kilometers per hour. The project, valued around 1.5 billion euros for construction and maintenance, was set to launch by the end of 2021 but did not meet that deadline.
Renfe is now considering substantial penalties, with a proposed fine of 166 million dollars and 80,000 euros per day for delays beyond the April 1 deadline set by the transport minister. Talgo, which reported an EBITDA of 76.5 million euros in 2023 after a 55 percent increase, has signaled it will not comment further on the matter. The status of this high-profile program remains pivotal to Talgo’s broader growth plans.
Meanwhile, attention turns to the two stage delivery of 79 trains for Germany’s Deutsche Bahn, a historic contract signed in 2019 valued at more than two billion euros. German customers are especially exacting about schedules, and observers warn that continued delays could jeopardize the order. Talgo has acknowledged the need to maximize its current industrial capacity to fulfill this commitment, noting that the Deutsche Bahn project has already been revised to account for exceptional circumstances, including the pandemic, energy costs, and the logistics crisis linked to the war in Ukraine.
Local media have highlighted that German representatives previously oversaw the order at Talgo facilities, underscoring the importance of meeting expectations for this critical customer. Yet the overall sense is that time is running short for Talgo. The search for a financial partner with industrial heft has gained urgency over the past two years as its main shareholder Pegasus, controlled by the British fund Trilantic, has signaled a willingness to exit. The ownership landscape remains in flux, with a mix of family and institutional investors weighing their options.
Make or new couple
The prospect of a new factory is fading. Even under rapid development, a new installation would require a minimum of two years, with three years being more typical. Talgo recognizes that expanding capacity is essential to keep pace with sector growth and to avoid missed opportunities. The company has publicly stated that it is pursuing commercial opportunities worth up to five billion in multiple markets and is aiming to participate in projects totaling over twenty thousand million, highlighting a broader strategic push beyond current orders. This suggests a willingness to explore additional avenues and potential partnerships.
Market observers note ongoing conversations with major players such as Siemens and Alstom. Some industry voices question whether Talgo’s relatively small scale makes it unattractive to the industry giants, whose combined market shares dwarf Talgo’s. Siemens holds around 6.8 percent of the global rolling stock market, while Alstom and Bombardier together account for roughly 13 percent; Talgo’s share sits around 0.6 percent with no large-scale presence. The mismatch between size and ambition has been a recurring theme in discussions about Talgo’s future.
There have also been discussions with CAF, a Basque region partner with a strong local footprint. However, differing project focuses—high speed versus trams or buses—led to a pause in talks. The question remains whether Talgo can secure the political and commercial support needed to pursue a larger, more integrated strategy in the near term.
Takeover offer as a solution
One potential path forward is the takeover bid by Magyar Vagon, a Hungarian consortium led by the national state-backed Corvinus fund. The offer values Talgo at 620 million euros at five euros per share and is currently at the announcement stage, with no formal prospectus yet approved. Proponents argue that Hungary’s industrial footprint could provide the missing capacity Talgo requires while keeping the company headquartered in Spain and preserving employment and intellectual property within the country.
Magyar Vagon operates several large facilities in Hungary, including a major plant in Dunakeszi and another in Szolnok, employing about 1,100 workers at the latter and spreading across seven workshops in multiple locations. The consortium employs roughly 2,460 people overall, with a mix of production, maintenance, and support roles. Industry insiders view the bid positively, seeing an opportunity to inject operational scale and skilled personnel into Talgo while maintaining a strong European presence.
While the board of Talgo has expressed that the offer is friendly and attractive to shareholders, approval from industry regulators and the consortium’s ability to preserve headquarters and intellectual property remains crucial. Pegasus, which holds 40 percent of Talgo through Trilantic, supports the initiative, and family and institutional investors tied to the Talgo network appear inclined to back the move. Trilantic had signaled a desire to exit the investment for financial reasons, reflecting a broader strategic decision around the company’s long-term ownership and control.