Hitachi Rail on Sept. 18 reported refiling its merger notification with the European Commission, which it said formally restarts the merger clearance process for acquiring Thales’s Ground Transportation Systems (GTS) in the European Union.
Hitachi announced the proposed acquisition in August 2021. It said that the expansion would drive growth in its global railway signaling business, bringing an enhanced turnkey offering to new markets around the world and accelerating development of its Mobility as a Service (MaaS) offering.
Since the announcement, “Hitachi Rail and Thales have been progressing toward completing the €1,660 million deal, securing the regulatory approvals necessary for the transaction to proceed, including achieving merger clearances in 11 of the 13 required jurisdictions,” Hitachi Rail reported.
In November 2022, the company withdrew its EU filing after the Commission raised concerns over the potential impact of the merger on competition for main line signaling projects in France and Germany. According to Hitachi, it has proposed divesting portions of its own signaling business to address the EC’s concerns.
“We are delighted to be in a position to refile for clearance in the EU after working extensively with the Commission on a proposed divestment package, which we are satisfied will address their concerns,” a Hitachi Rail spokesperson said. “We look forward to continuing to progress the acquisition of Thales’s Ground Transportation Systems (GTS), which we believe will deliver value for customers in the rail signaling and mobility sectors in Europe and globally.”
The two groups are “committed to finalizing this transaction in the first half of calendar year 2024,” according to Thales.
Hitachi Rail also reported that it expects to receive a decision on the proposed transaction from the U.K. anti-trust authority, the Competition and Markets Authority (CMA) “shortly.”
Britain’s anti-trust authority, the CMA, has made similar observations over the delivery of ETCS for future British mainline signaling projects and initially the supply of CBTC.
Hitachi subsequently proposed a remedy package under which it would it divest all shares of Hitachi Rail STS France and the activities and backlog contracts of Hitachi Rail Deutschland. The package also includes all of Hitachi’s resources and assets relating to ETCS in Britain and the associated backlog of projects.
The proposed remedy did originally include some CBTC assets. However, this was withdrawn after the CMA’s Inquiry Group, which is scrutinising the proposed merger, updated its provisional findings and found that the acquisition would not result in a substantial reduction in competition in the supply of CBTC in Britain.
Britian’s rail regulator, the Office of Rail and Road (ORR), stated last month that the proposed package would satisfy its concerns over future mainline signaling competition in Britain. A Hitachi spokesperson also confirmed that the company is satisfied that the same remedy package will address the EC’s concerns.
The CMA’s final report on the proposed transaction is due by Oct. 6.
Under the proposal, Hitachi Rail would divest all shares of Hitachi Rail STS France, transferring ownership of the ETCS wayside and digital interlocking platforms as well as its Argos wayside and interlocking platforms. It will also dispose of Hitachi Rail France’s business for ETCS and legacy onboard unit projects along with ownership or access to intellectual property rights. The remedy taker would benefit from the transfer of all existing ETCS ATP wayside, interlocking, ETCS and legacy onboard unit projects, service and maintenance agreements.
In addition, the divestment would include all of Hitachi’s resources and assets relating to digital mainline signaling, or ETCS, in Britain, and the associated backlog of projects. Hitachi proposes carving out this element of its business into a new legal entity that would be transferred to Hitachi Rail France. It will also include the activities and backlog contracts of Hitachi Rail Deutschland, including an office in Munich, which has a test laboratory for factory acceptance tests.