HITACHI Rail confirmed on September 19 that it has refiled its merger notification with the European Commission (EC) and formally restarted the merger clearance process in the European Union (EU) as it finally closes in on completing the £1.7bn acquisition of Thales’ Ground Transportation Systems business.
Hitachi has secured merger clearance in 11 of the 13 required jurisdictions but has faced scrutiny over the impact of the transaction on competition in signalling markets in Britain and the EU.
Hitachi withdrew its initial filing with the EU in November 2022 after the EC raised concerns about the potential effect on the mainline signalling market in France and Germany. However, following “constructive informal discussions” with the Directorate-General for Competition at the EC, Hitachi has now refiled its notification of the transaction.
Thales says that the two companies are committed to finalising the transaction in the first half of 2024.
Britain
Britain’s anti-trust authority, the Competition and Markets Authority (CMA), has made similar observations over the delivery of ETCS for future British mainline signalling 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 However, this was withdrawn after the CMA’s Inquiry Group, which is scrutinising the proposed merger, updated its provisional findings and found that the acquisition would not result in a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 stating that the proposed package would satisfy its concerns over future mainline signalling competition in Britain. A Hitachi spokesperson also confirmed that the company is satisfied that the same remedy package will address the EC’s concerns.
Hitachi added that it expects to receive a decision on the proposed transaction from the CMA “shortly.” The CMA’s final report on the proposed transaction is due by October 6.
Hitachi announced the proposed acquisition of the Thales Ground Transportation Systems business in August 2021. It said at the time that the transaction would drive growth in its global railway signalling business, bringing an enhanced turnkey offering to new markets around the world and accelerating development of its Mobility as a Service (MaaS) offer.
The remedy package
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 signalling, 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.
