Hitachi has offered to sell its train-signalling business in order to appease regulators scrutinising its proposed takeover of Thales’ rail infrastructure.
The rail arms of both Hitachi and Thales are major global suppliers of signalling systems for mainline and urban tracks. In August 2021, Hitachi announced a €1.7bn deal to acquire the Thales Ground Transportation Business.
Last year, the Competition and Markets Authority (CMA) warned that the merger could lead to higher fares for consumers. The body’s independent inquiry group concluded that if the merger was allowed to go ahead, few credible competitors would remain.
In response, Hitachi has offered to sell its signalling business in the UK, France and Germany. The CMA said it would still need to approve the purchase, and Hitachi’s key customers in these countries will also need to agree to the transfer of the relevant signalling contracts.
But it said that once this requirement is met, competition would be preserved to the extent that Network Rail would not be negatively affected by the merger.
The CMA concluded that, while Thales is an important supplier to the London Underground – the only urban rail network in Great Britain with plans to carry out new major signalling projects in the foreseeable future – Hitachi would be unlikely to meet Transport for London (TfL) requirements for these projects.
Renewing the signalling systems on the London Underground is particularly challenging compared with most other metro systems, given the size, complexity and age of the network, the CMA said, and Hitachi is unlikely to have attained the required level of experience by the time TfL starts its next search for signalling suppliers.
Stuart McIntosh, chair of the CMA’s 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.
“We have concluded that the merger will not reduce competition to provide CBTC [communications-based train control] 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.”
