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Hitachi to purchase Finmeccanica 8217 s rail units

Article By: ,  Financial Analyst
February 24, 2015 4:26 PM

Hitachi Ltd has signed an agreement today (February 24th) to buy two rail units from struggling Italian firm Finmeccanica.

The Japanese group will pay €773 million (£584 million) for Finmeccanica’s 40 per cent stake in rail signalling operator Ansaldo STS and €36 million for train manufacturer AnsaldoBreda, the two companies said in a statement. 

At the end of the year, after the deal is closed, Hitachi will launch a mandatory tender offer on Ansaldo STS’s publicly traded shares. The move is expected to boost the Japanese company’s total payout to €2.2 billion.

Finmeccanica had been trying to sell its loss-making train business AnsaldoBreda and a controlling stake in rail-signalling company Ansaldo STS for several years.

A stronger presence in Europe

The deal will cut the government-owned firm's debt by 15 per cent – which represents around €600 million – and will help it to refocus on aerospace and defense. The Italian group owes a total of €4.1 billion of debt.

"It remains to be seen what is the possible negative value of AnsaldoBreda's residual contracts … but there's no doubt on the positive impact (for Finmeccanica) of the overall agreement," Banca Akros analyst Gabriele Gambarova told Reuters.

Meanwhile, Hitachi will be able to sell combined carriage and signals packages, while gaining a stronger foothold in Europe, having already relocated its rail division to London last year.

“We will keep the current employees and factories of AnsaldoBreda and we will utilise those of Ansaldo STS,” said Hiroaki Nakanishi , chairman and chief executive of Hitachi. "As for the current management of the Italian companies, our first priority is to utilise the current structure."

Hitachi has been looking to expand overseas after most of Japan’s nuclear power plants shut down following the 2011 earthquake and tsunami that caused radiation leaks at a facility on the northeast coast of the country.

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