The UK Competition and Markets Authority (CMA) has made its final decision regarding Hitachi’s 1.7 billion EUR proposed purchase of Thales’ Ground Transportation (GTS) business.
Following an in-depth investigation, the authority has concluded that Hitachi Rail’s offer to sell part of its mainline signalling business satisfies its previous competition concerns.
Hitachi Rail and Thales’ GTS are both global suppliers of signalling systems for mainline and urban railway networks. CMA thus previously concluded that the merger could substantially reduce competition in this field. This is because Thales and Hitachi are major competitors in the supply of these systems, and should the merger go ahead, few credible competitors would remain.
In response to these concerns, Hitachi has offered to sell its existing mainline signalling business in the United Kingdom, France and Germany.
CMA considers this to be an effective and proportionate solution that will preserve competition and prevent customers such as Network Rail from being negatively affected by the merger.
CMA will now need to approve the purchaser and Hitachi’s key customers will need to agree to the transfer of their relevant contracts.
In addition, based on new evidence, CMA no longer has competition concerns regarding the supply of Communications Based Train Control (CBTC) signalling systems. These systems are used on urban networks such as the London Underground, which is the only rail network in Great Britain that plans to carry out new CBTC projects in the foreseeable future.
Thales is currently a key supplier for this network. However, CMA has now concluded that Hitachi would have been unable to act as a competitor for these projects due to Transport for London’s (TfL) complex requirements. It believes that Hitachi is unlikely to have attained the required experience prior to the next major TfL signalling tenders.
“Effective signalling is vital for safe and reliable rail travel, which is why it has been important for us to review this merger thoroughly before reaching a final decision. 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.”
With this clearance from the CMA, Hitachi and Thales have now received regulatory approvals in 12 of the 13 required jurisdictions.
It has recently refiled its merger notification with the European Commission and now anticipates a final anti-trust decision on the proposed acquisition by early November.
“Having gained clearance from the CMA, we are now focused on achieving the final anti-trust clearance from the European Commission.
“We believe strongly in the competitive benefits of the deal to acquire Thales’ Ground Transportation Systems, which will deliver value for customers in the rail signalling and mobility sectors in Europe and around the world.”
