Hitachi Rail selling signalling business to push through Thales merger

(Sharecast News) - Hitachi Rail will offload part of its mainline signalling business in order to push through its proposed €1.7bn purchase of Thales Ground Transportation. According to the Competition and Markets Authority, the merger would give rise to competition concerns regarding the supply of digital mainline signalling systems, used increasingly on the country's main railway networks.

An independent inquiry group said that Thales and Hitachi were both well placed to supply these systems and that, should the merger go ahead, few credible competitors would remain.

In response to the watchdog's findings, Hitachi offered to sell its existing mainline signalling business in the United Kingdom, France, and Germany. The FCA will need to approve the purchaser, while Hitachi's key customers in the aforementioned countries will also need to agree to the transfer of the relevant signalling contracts. However, the inquiry group said it considers this to be an "effective and proportionate remedy".

It also said it no longer has competition concerns regarding the supply of communications-based train control signalling systems, used on urban rail networks such as the London Underground. The group concluded that, while Thales was "an important supplier to the London Underground", the only urban rail network in the UK set to carry out new CBTC projects in the foreseeable future, Hitachi would be unlikely to meet Transport for London's requirements for these projects.

Stuart McIntosh, chair of the independent inquiry group, said: "We have concluded that the merger will not reduce competition to provide CBTC signalling systems, and in particular those required on the underground network in London.

"The picture is not the same for digital mainline signalling. To address our concerns here, Hitachi is selling part of its existing mainline signalling business to an independent purchaser. This will protect competition, which is key to keeping costs down, maintaining high quality of service and promoting innovation."

Reporting by Iain Gilbert at Sharecast.com