The Spanish government has blocked the sale of train manufacturer Talgo to a Hungarian consortium partially owned by the government, citing "threats to national security and public order", local media reported on August 27, citing Spanish media reports.

Madrid repeatedly emphasized the strategic importance of Talgo, noting that the company has access to sensitive information about the country's railway network that is crucial to national security.

The Hungarian consortium, which includes the Hungarian train manufacturer Ganz MaVag (Magyar Vagon) and the state fund Corvinus, made a €5 per share cash offer in February for all outstanding shares, putting the company’s market value at €619mn, a hefty premium compared to the then market price.

In March, after the news surfaced, Spanish Transport Minister Oscar Puente said his government "will do everything possible" to reject the offer by the Hungarian consortium.

According to local media reports, the Spanish government had concerns about Hungarian Prime Minister Viktor Orban's close ties to Russia. After a thorough review of the offer by the Foreign Investment Board, the cabinet blocked the deal. Under a special decree designed to protect domestic companies from hostile takeovers, the Spanish government has the authority to veto foreign acquisitions.

Talgo’s board considered the bid as friendly and called it an attractive offer. Minority shareholder Pegaso, led by the British fund Trilantic, which holds 40% of the shares, was willing to sell its stake in the company.

Skoda Transportation, part of the PPF Group, owned by the widow of the billionaire Petr Kellner, who died three years ago, initially expressed interest in merging with Talgo but backed down last month.

Pro-Orban media outlets dubbed the decision outrageous and said Ganz MaVag could sue the Spanish government. Neither parties have commented on the reports.

Trading in Talgo shares was suspended temporarily on the stock market. The share price plummeted 10% after trading resumed later on Tuesday.

Talgo was founded in 1942 and its main shareholder is the investment fund Trilantica. Besides supplying the Spanish railway company Renfe, it exports to Germany, Saudi Arabia, Egypt and the USA. It manufactures trains with adjustable gauge axles, which allows high-speed trains to operate on different track gauges.

The company currently holds an order backlog of more than €4bn but faces capacity issues in fulfilling these orders. Last year, Deutsche Bahn awarded Talgo a €1.4bn contract, one of the largest in its history, commissioning 56 long-distance, high-speed trains.