Tokyo and London, Aug 4, 2021 - (JCN Newswire) - Hitachi, Ltd. (TSE: 6501) and Hitachi Rail today agreed to acquire
Thales' Ground Transportation Systems business (the "Business" or "GTS") for an enterprise value of EUR1,660 million
(~YEN215 billion). 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(1), subject to the usual conditions including
regulatory and antitrust clearances. Employee representatives of both Thales and Hitachi Rail will be informed and
consulted according to the laws of the countries concerned throughout the process. Hitachi intends to promote the
conditions for a smooth and successful integration of the Business and is willing to take a number of social commitments
in this respect.
GTS, a division of Thales, is a global leader in Rail Signalling and Train Control Systems, Telecommunications and
Supervision systems and Fare collection solutions. In FY2020, GTS generated EUR1.6bn 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 signalling
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 signalling 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.
With the complementary strength of GTS's signalling activities, and rapid growth in MaaS and digitization in the rail
sector, GTS will help Hitachi Rail to potentially reach
YEN 1 trillion (EUR7.7 billion) revenue and double-digit adjusted operating income ratio by FY2026, or around four years
from closing.
The Business consists of four segments: mainline railroad signalling systems, urban rail signalling, integrated
communication systems and revenue collection systems.
Around 50% of the Business is dedicated to digital offerings, and the company employs a wealth of digital talent in the
mobility sector.
The combination of Hitachi Rail and Thales' Ground Transportation Systems business is strategically attractive,
geographically and technologically complementary and synergistic:
Global:
Complements Hitachi Rail's existing presence in Japan, Italy, UK and the United States with GTS's core locations
including Germany, France and Canada. Creates a global signalling provider to meet customer demand in more regions
around the world. This reinforces Hitachi Rail's core business as a fully integrated, global provider of rail solutions
across rolling stock, signalling, service & maintenance, digital technology and turnkey solutions.
Digital:
Provides access for GTS' customers to Hitachi's Lumada digital solutions and services, and GlobalLogic's leading digital
capability. This accelerates Hitachi Rail's entry into the MaaS segment which could drive significant growth in line
with Hitachi's 2021 Mid-term Management Plan. According to independent research, the global "MaaS" market is expected to
grow by 25%+ compound annual growth rate to 2025(2). The combined Hitachi Rail and GTS business would be well positioned
to benefit from this wider trend.
Sustainable:
Supports Hitachi's long-term environmental targets, including achieving carbon neutrality at all its business sites by
2030 and an 80% reduction in CO2 emissions across the company's value chain by 2050. For example, GTS's GreenSpeedTM
driver advisory system cuts energy consumption and CO2 by 15% through optimizing train speeds.
Synergistic:
Run-rate synergies in excess of EUR100 million per year are achievable through the greater scale of the combined
business, which would enable growth opportunities such as cross-selling to a wider global customer base and cost
competitiveness such as improving effectiveness of procurement, optimizing engineering capabilities and enhanced
production. The run-rate synergies are expected to be achieved around 4 years after closing.
Andrew Barr, Chief Executive Officer, Hitachi Rail, said: "Today's announcement marks an exciting opportunity for the
teams at Hitachi Rail and Thales' Ground Transportation Systems business to create new value for our customers, cities
and passengers around the world. Not only will we grow the reach of our core signalling capabilities as part of our
turnkey offering, but we are also bringing together our digital and Mobility as a Service capabilities. The strong
teams, customer relationships and technologies at GTS will help us grow to become a major player, further enabled by
Lumada and the digital engineering of our teams at GlobalLogic and the broader Hitachi Group."
Philippe Keryer, EVP Strategy, Research & Technology, Thales said: "After discussions with key market players, Thales has selected the best industrial partner to
ensure a successful long term development of its ground transportation business. This move is creating significant value
for our clients, employees and shareholders and enables Ground Transportation Systems to be at the forefront of growth
in sustainable mobility."
(1) Equivalent to Hitachi's FY2022 for the year ending 31 March 2023
(2) Mobility-as-a-Service (MaaS) Global Study 2025, BIS research