Thales enters exclusive talks to sell rail unit to Japan’s Hitachi for 1.66bn euros


Thales is in talks to sell its Ground Transportation Systems unit to Hitachi Rail in a multi-billion euro deal, in the process beating out Spanish rival CAF with its bid.

The French defence electronics manufacturer’s boss, Patrice Caine, said the move was motivated by its desire to focus on its three high-tech long-term growth businesses: Aerospace, Defence and Security and Digital Identity and Security.

The transaction assigns the railway signaling business an enterprise value of €1.66bn.

According to Caine, the sale would also drive “accelerated” operating margin accretion and further deleveraging.

For its part, Italy-based Hitachi Rail, a unit of Japan’s Hitachi, said the purchase had the potential to raise its rail unit’s revenues to 1.0trn yen (€7.73bn) by 2026.

Run-rate synergies meanwhile were seen reaching more than €100.0m euro per year by that same date.

Hitachi also emphasised the geographic overlap between the two businesses, given Hitachi Rail was already present in Japan, Italy, UK, and the US – with core locations in Germany, France, and Canada.

On the assumption of continued growth in revenue and earnings before interest and taxes at GTS, Hitachi expected GTS’s implied standalone forward EV/EBIT valuation multiple would stand around 10 times’ by transaction close in roughly 18 months’ time.

As of 1215 BST, shares of Thales were adding 1.41% to €88.88, while those of Hitachi finished the Japanese trading session off by 0.44% to 6,083.0 yen.

Shares of CAF were trading up 3.31% to €35.90.