Hitachi’s £1.5bn Thales tie-up gets green light from CMA after proposed sell off
The UK competition watchdog has given the green light for Hitachi’s £1.5bn takeover of Thales’ rail signalling interests, after the Japanese firm agreed to sell parts of its European mainline business.
The Competition and Markets Authority (CMA) launched an investigation into the deal amid concerns that it would reduce competition in the supply of rail signalling systems in the UK, a market traditionally dominated by a very small number of suppliers.
Its investigation concluded today that the merger would give rise to competition concerns, with Thales and Hitachi’s tie-up leaving “few credible competitors” left in the market.
But the CMA today said that a proposed offer from Hitachi to sell its existing mainline signalling business in the UK, France and Germany would be an “effective and proportionate remedy, which will preserve competition and ensure customers, such as Network Rail, will not be negatively affected by the merger.”
The sell off will still need the regulators approval and Hitachi’s key customers in these countries will also need to agree to the transfer of relevant signalling contracts.
Stuart McIntosh, chair of the independent inquiry group, said “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.”
McIntosh added that Hitachi’s sale to an independent purchaser would “protect competition, which is key to keeping costs down, maintaining high quality of service and promoting innovation.”
Its announcement today reaffirmed that the merger is unlikely to reduce competition in the supply of communications based train control (CBTC) systems to the Tube, as Hitachi would be unlikely to ever break the duopoloy of its two major suppliers, Thales and Siemens.
“While Thales is an important supplier to the London Underground, the only urban rail network in Great Britain with plans to carry out new CBTC projects in the foreseeable future, Hitachi would be unlikely to meet TfL’s requirements for these projects.”
The investigation into the deal, which involves two of the leading suppliers of both urban and mainline signalling systems, began in December.
Hitachi and Thales entered into discussions surrounding the takeover more than two years ago, in August 2021.