Hitachi Rail agrees to acquire Thales’ ground transportation systems business for €1.66bn

Philippe Keryer of Thales

Hitachi, Ltd. and Hitachi Rail agreed to acquire Thales‘ Ground Transportation Systems business for an enterprise value of €1,660 million. 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. 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 provider in Rail Signalling 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 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 digitisation in the rail sector, GTS will help Hitachi Rail to potentially reach YEN 1 trillion ( €7.7 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 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. 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 optimising train speeds.

Synergistic:
Run-rate synergies in excess of €100 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, optimising engineering capabilities and enhanced production. The run-rate synergies are expected to be achieved around 4 years after closing.

Andrew Barr

Andrew Barr, chief executive officer, Hitachi Rail, says, “The 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 comments, “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.”

Comment on this article below or via Twitter: @IoTNow_OR @jcIoTnow

RECENT ARTICLES

Semtech enhances global connectivity with NTN support in HL78 modules

Posted on: March 29, 2024

Semtech Corporation has announced the integration of non-terrestrial network (NTN) support into its HL series LPWA modules, specifically the HL7810 and HL7812. This significant advancement showcases a leap forward in enabling uninterrupted global connectivity even amidst the most challenging conditions.

Read more

Enhance EV charging performance with cellular connectivity

Posted on: March 28, 2024

Electric vehicles (EVs) are steadily growing their market share at the expense of internal combustion engine vehicles. The growth is fuelled by several factors. Perhaps most importantly, prices for EVs have started to drop as competition in the industry is intensifying. New players and models are emerging, prompting several established EV makers to lower their

Read more
FEATURED IoT STORIES

What is IoT? A Beginner’s Guide

Posted on: April 5, 2023

What is IoT? IoT, or the Internet of Things, refers to the connection of everyday objects, or “things,” to the internet, allowing them to collect, transmit, and share data. This interconnected network of devices transforms previously “dumb” objects, such as toasters or security cameras, into smart devices that can interact with each other and their

Read more

The IoT Adoption Boom – Everything You Need to Know

Posted on: September 28, 2022

In an age when we seem to go through technology boom after technology boom, it’s hard to imagine one sticking out. However, IoT adoption, or the Internet of Things adoption, is leading the charge to dominate the next decade’s discussion around business IT. Below, we’ll discuss the current boom, what’s driving it, where it’s going,

Read more

9 IoT applications that will change everything

Posted on: September 1, 2021

Whether you are a future-minded CEO, tech-driven CEO or IT leader, you’ve come across the term IoT before. It’s often used alongside superlatives regarding how it will revolutionize the way you work, play, and live. But is it just another buzzword, or is it the as-promised technological holy grail? The truth is that Internet of

Read more

Which IoT Platform 2021? IoT Now Enterprise Buyers’ Guide

Posted on: August 30, 2021

There are several different parts in a complete IoT solution, all of which must work together to get the result needed, write IoT Now Enterprise Buyers’ Guide – Which IoT Platform 2021? authors Robin Duke-Woolley, the CEO and Bill Ingle, a senior analyst, at Beecham Research. Figure 1 shows these parts and, although not all

Read more

CAT-M1 vs NB-IoT – examining the real differences

Posted on: June 21, 2021

As industry players look to provide the next generation of IoT connectivity, two different standards have emerged under release 13 of 3GPP – CAT-M1 and NB-IoT.

Read more

IoT and home automation: What does the future hold?

Posted on: June 10, 2020

Once a dream, home automation using iot is slowly but steadily becoming a part of daily lives around the world. In fact, it is believed that the global market for smart home automation will reach $40 billion by 2020.

Read more

5 challenges still facing the Internet of Things

Posted on: June 3, 2020

The Internet of Things (IoT) has quickly become a huge part of how people live, communicate and do business. All around the world, web-enabled devices are turning our world into a more switched-on place to live.

Read more