Thales to offload railway signalling division to focus on cyber security

Hitachi set to acquire the transport business for approximately £1.4 billion

Thales is in talks to sell its transportation business to Hitachi Rail, allowing the company to divert its focus to its aerospace, defence, as well as digital identity and security businesses.

The deal, valued at €1.66 billion (approximately £1.4 billion), will see Hitachi Rail absorb Thales’ ground transportation systems business (GTS), while the aerospace firm will seek to develop its other core businesses.

This strategic move will see GTS and its 9,000 employees combine with Hitachi’s business seamlessly thanks to strong technical, geographical and commercial overlap, with this combined unit building out Hitachi’s mobility as a service (MaaS) product. All existing GTS employees will be given "enhanced professional opportunities", according to Thales.

“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,” said Thales EVP for strategy, research and technology, Philippe Keryer.

“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.”

This division has performed relatively well financially in recent years, with Thales claiming GTS delivering its best financial performance of the past seven years through 2020 and during the first half of 2021. This is despite the COVID-19 pandemic grinding public transport systems around the world to a halt.

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Thales wants to carve away this division so that it can focus on three “long-term high technology growth markets”, as it describes them, including aerospace, defence and security, as well as digital identity and security. The firm believes these can sustainably deliver double-digit margins over the coming years.

“Today’s announcement marks an exciting opportunity for the teams at Hitachi Rail and Thales’s Ground Transportations Systems business to create new value for our customers, cities and passengers around the world,” said Hitachi Rail’s CEO Andrew Barr.

“Not only will we grow the reach of our core signaling capabilities as part of our turnkey offering, but we are also bringing together our digital and MaaS 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.”

Employees from both companies will be consulted on the merger process, with the transaction expected to be completed by the end of 2022, or the start of 2023 at the latest.

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