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.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.