MCH sells minority stake in Talgo in €69m deal

The GP controlled a 4.75% stake in the company via its holding MCH Inversiones Industriales and 4.25% via its MCH Iberian Capital Fund III.

The transaction was valued at €5.61 per share, which equates to a total amount of €69.17m, according to public documents filed with CNMV.

The price of the placement includes an 8.33% discount on the closing price recorded at the end of the previous session. Furthermore, this price is well below the IPO's price of €9.25 per share.

According to the GP, despite a decrease in the share price after the IPO, MCH reaped a 5x cash-on-cash return and an IRR of 37.7% with this sale.

UBS acted as placement agent for MCH.

Previous funding
MCH backed Talgo in March 2006 alongside US investment bank Lehman Brothers in a €178m deal that included a €40m capital increase. As part of the deal, Lehman Brothers acquired a 64% stake, while MCH bought 8.5% via its MCH Iberian Capital II fund. The remaining stake was retained by the company's founding Oriol family.

Subsequently, MCH acquired an additional 7.8% in Talgo via another vehicle, MCH Iberian Capital III, reaching a combined ownership of 16.3%.

The stake controlled by Lehman Brothers was acquired in 2009 by US-based Trilantic Capital Partners, which sold a small portion to Spanish GP Torreal in 2013.

Subsequently, a 45% stake in Talgo was listed on the Spanish stock exchange in 2015. The IPO saw 61.57 million shares sold at €9.25 per share for a total value of €570m. The IPO gave the company a market cap of around €1.25bn.

At the time of the placement, the company was wholly controlled by Pegaso Rail International, owned by Trilantic Capital Partners (63.7%), MCH (16.3%), and the founding Oriol family (20%). Following the listing, MCH retained a 9% stake in the company, Trilantic a 35% stake, and Santa Lucía de Seguros a 5% holding.

Company
Established in 1942 and headquartered in Las Rozas de Madrid, Talgo specialises in designing and manufacturing lightweight and high-speed trains. The company also offers maintenance and safety services to global rail operators.

Talgo generated EBITDA of €65.5m in 2018, 25% less than 2017, and revenues of €324m, 16% down on the previous year. Gross bank debt amounted to €277m as of December 2018, including €95m in committed credit lines with full availability.

People
MCH Private Equity – Jose Maria Muñoz (managing partner).
Talgo – Jose María de Oriol (CEO).

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