Thales, Europe’s largest defence electronics company has now revealed that it was in advanced talks to sell its railway signalling business to Japan`s Hitachi in a deal that values the division at 1.66 billion euros ($2 billion).

This development comes at a time when the French firm is planning to streamline its sprawling operations and reassure investors of its focus on the core business of making high-tech equipment for the defence and aerospace industries.

The price tag of 1.66 billion euros comes down to the enterprise value, including debt, of Thales` unit, dubbed Ground Transportation Systems.

This sale also reflects a multiple of 13.8 times of the unit`s twelve-month earnings before interest and taxes (EBIT), Thales said in a statement, adding that it expected the deal to close by the end of 2022 or the start of 2023.

The signalling unit provides train control systems and fare collection services and it is small compared with competitors.

This sale comes at a time of consolidation in the industry as independent players align themselves with bigger industrial groups.

In January, French train maker Alstom closed its 5.5-billion-euro acquisition of Bombardier`s rail business, making it the industry`s No. 2 worldwide, after China’s CRRC.

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