Hitachi Rail Enters Agreement to Acquire Thales’ Ground Transportation Systems Business

By Shin Kai

Acquisition or Partnership

Hitachi, Ltd. and Hitachi Rail agreed to acquire Thales’ Ground Transportation Systems (GTS) business for an enterprise value of €1,660m. The final purchase price will be determined after customary adjustments typical for a transaction of this nature. The acquisition is expected to close in late FY2022, subject to the usual conditions including regulatory and antitrust clearances.

GTS, a division of Thales, is a global leader in Rail Signaling and Train Control Systems, Telecommunications and Supervision systems, and Fare collection solutions. In FY2020, GTS generated €1.6bn of revenues and today employs around 9,000 employees across 42 countries and is headquartered in Germany, France and Canada. Hitachi Rail expects GTS to show continued revenue and EBIT growth and by closing, the implied standalone forward EV/EBIT valuation multiple should be around 10x.

As a result of this agreement, Hitachi Rail expects to drive growth by expanding the scale of its rail signaling systems business globally, bringing an enhanced turnkey railway offering to new markets around the world. The combined business will be positioned to become a global leader in the rail signaling market. The combined strength of Hitachi and GTS’s digital expertise will also help Hitachi Rail to accelerate its Mobility as a Service (MaaS) offering for a global customer base.

The GTS business consists of four segments: mainline railroad signaling systems, urban rail signaling, integrated communication systems, and revenue collection systems. Around 50% of its business is dedicated to digital offerings, and the company employs a wealth of digital talent in the mobility sector.

With the complementary strength of GTS’s signaling activities, and rapid growth in MaaS and digitization in the rail sector, GTS will help Hitachi Rail to potentially reach €7.7bn revenue and double-digit adjusted operating income ratio by FY2026, or around four years from closing.

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