- Entry into exclusive negotiations with Hitachi Rail on the sale
of “Ground Transportation Systems” business, for an enterprise
value of € 1,660 million
- Compelling valuation reflecting effective turnaround
- Reinforcement of Thales's strategic focus on 3 long-term growth
markets: Aerospace, Defense & Security, Digital Identity and
Security, driving accelerated EBIT margin accretion and further
deleveraging
- Combined GTS and Hitachi Rail business to be positioned as a
global leader in the rail signaling market
- Employee representative bodies of both Thales and Hitachi Rail
are being consulted on this project, which is also subject to usual
closing conditions
Thales (Euronext Paris: HO) and Hitachi Rail announce today that
they are entering into exclusive negotiations on the sale of
Thales’s Ground Transportation Systems Global Business Unit
(“Ground Transportation Systems” or “GTS”) for an enterprise value
of € 1,660 million.
With around 9,000 employees at the end of 2020, Ground
Transportation Systems is a global leader in Rail Signaling and
Train Control Systems, Telecommunications and Supervision systems
and Fare collection solutions, key technologies for a more
sustainable mobility. Around 8 billion passengers benefit from
GTS’s rail technologies every year.
Thanks to the engagement of GTS employees and, more globally, of
Thales’s management team, the business achieved a remarkable
turnaround over the past 5 years, delivering in 2020 and H1 2021
its best financial performance of the past 7 years, in spite of the
Covid-19 crisis.
Thanks to the strong technical, geographical and commercial
complementarities between Hitachi Rail and Ground Transportation
Systems, the combination will create a leading rail signaling
provider with a broader product offering and stronger capabilities
to meet customer demand around the world. In addition, it will
offer GTS’s employees enhanced professional opportunities. The
combined strength of Hitachi and GTS’s digital expertise will also
help Hitachi Rail to accelerate its Mobility as a Service (“MaaS)
offering.
Through this transaction, Thales reinforces its strategic focus
on 3 long-term high technology growth markets: Aerospace, Defense
& Security, and Digital Identity & Security. Each of its
businesses is an industry leading pure player focused on
intelligent systems and digital solutions, able to sustainably
deliver double-digit EBIT margins. This move enables the Group to
now target an EBIT margin of 12% in the medium-term.
The transaction will also strengthen Thales’s balance sheet and
provide substantial cash optionality.
“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. 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.” – Philippe
Keryer, EVP Strategy, Research & Technology, Thales
“With this major strategic move, we will be able to focus on the
development of our 3 high-tech long-term growth businesses, each of
them able to sustainably deliver double-digit margins -- Aerospace,
Defense & Security, and Digital Identity & Security --
further strengthening their best-in-class market position.” –
Patrice Caine, Chairman and CEO, Thales
“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. 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.” – Andrew Barr, Chief Executive
Officer, Hitachi Rail
Updated 2021 financial outlook
Since the transport segment will be treated as discontinued
operations in the 2021 financial statements, Thales’s 2021
financial outlook is updated as follows:
- As in 2019 and 2020, a book-to-bill ratio above 1;
- Sales in the range of €15.8 billion to €16.3 billion;
- An EBIT margin in the range of 9.8% to 10.3%, up 180 to 230
basis points from 2020.
Next steps
Employee representatives of both Thales and Hitachi Rail will be
informed and consulted on this project according to the laws of
involved countries.
The completion of the transaction will require the carve-out of
the business in several countries, and is subject to usual
conditions including regulatory and antitrust clearances. It is
expected to close by the end of calendar year 2022 / early in
calendar year 2023.
Deal background
- Scheme: 100% acquisition of “Ground Transportation Systems”
business by Hitachi Rail following carve-out from Thales, subject
to approvals from employee representatives and relevant regulatory
bodies
- Price: Enterprise Value of € 1,660 million (¥215bn),
corresponding to an implied valuation of 13.8x EV/EBIT, based on
reported H2 2020-H1 2021 segment EBIT. The final purchase price
will be determined after customary adjustments for net working
capital and net debt based on actual amounts at the closing
date.
- Source of funds: Paid by cash at hand at closing
- Offer approved by both Thales’s and Hitachi’s Boards of
Directors
- Transaction advisors: In connection with the transaction,
Lazard acted as financial advisor to Thales, and BDGS, Baker
McKenzie and August Debouzy acted as legal counsels.
****
This press release contains inside information as per the
definition of article 7 of EU regulation No. 596/2014. It contains
certain forward-looking statements. Although Thales believes that
its expectations are based on reasonable assumptions, actual
results may differ significantly from the forward-looking
statements due to various risks and uncertainties, as described in
the Company's Universal Registration Document, which has been filed
with the French financial markets authority (Autorité des marchés
financiers – AMF).
About Thales
Thales (Euronext Paris: HO) is a global leader in advanced
technologies, investing in digital and “deep tech” innovations –
connectivity, big data, artificial intelligence, cybersecurity and
quantum computing – to build a confident future crucial for the
development of our societies. The Group provides its customers –
businesses, organisations and governments – in the defense,
aeronautics, space, transport, and digital identity and security
domains with solutions, services and products that help them fulfil
their critical role, consideration for the individual being the
driving force behind all decisions.
Thales has 81,000 employees in 68 countries. In 2020 the Group
generated sales of €17 billion.
About Hitachi, Ltd.
Hitachi, Ltd. (TSE: 6501), headquartered in Tokyo, Japan, is
focused on its Social Innovation Business that combines information
technology (IT), operational technology (OT) and products. The
company’s consolidated revenues for fiscal year 2020 (ended March
31, 2021) totaled ¥8,729.1bn ($78.6bn), with 871 consolidated
subsidiaries and approximately 350,000 employees worldwide. Hitachi
is working to increase social, environmental and economic value for
its customers across six domains; IT, Energy, Industry, Mobility,
Smart Life and Automotive Systems through Lumada, Hitachi's
advanced digital solutions, services, and technologies for turning
data into insights to drive digital innovation. For more
information on Hitachi, please visit the company's website at
https://www.hitachi.com.
About Hitachi Rail
Hitachi Rail is a fully integrated, global provider of rail
solutions across rolling stock, signalling, service &
maintenance, digital technology and turnkey solutions. With a
presence in 38 countries across six continents and over 12,000
employees, our mission is to contribute to society through the
continuous development of superior rail transport solutions. We are
proud of our global achievements, from our world famous ‘bullet
trains’, to our signalling solutions and turnkey projects,
state-of-the-art traffic management and digital solutions. Drawing
on the wider Hitachi Group’s market-leading technology and
research-and-development capabilities, we strive for industry
leading innovations and solutions that can deliver value for
customers and sustainable railway systems that benefit wider
society. For information about Hitachi Rail, visit
www.hitachirail.com.
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Thales, Media Relations Cédric Leurquin +33 (0)1 57 77 90
93 cedric.leurquin@thalesgroup.com
Thales, Analysts/Investors Bertrand Delcaire +33 1 57 77
89 02 ir@thalesgroup.com
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