TOKYO -- Hitachi looks close to sealing a deal to acquire the rail car and rail signal units of Italian aerospace and defense giant Finmeccanica.
Since Finmeccanica put the two rail units up for sale, bidders have narrowed down to two: Hitachi and China CNR. By Thursday, the Chinese train manufacturer had withdrawn its bid, leaving the Japanese company as the sole remaining bidder, according to sources with knowledge of the process.
Hitachi is expected to finalize its proposal as early as this week and present it to Finmeccanica. It will likely pay about 200 billion yen ($1.71 billion) for the deal.
The global railroad market is estimated at 20 trillion yen and is seen growing 2-3% a year. Demand to replace equipment is strong in Europe, which accounts for more than 30% of the total market, and emerging nations are moving to build high-speed and urban rail networks. Meanwhile, the Japanese market has been shrinking, with production of rail cars down about 40% over the last 20 years.
Hitachi positions rolling stock and train signal systems as core operations, with an eye on realizing growth abroad. It has already had some success, winning a large order for high-speed rail cars in the U.K.
Hitachi's rail business chalks up annual sales of 170 billion yen. Through the proposed acquisition, the figure will grow to more than 400 billion yen -- about half that of global leaders Siemens, Bombardier and Alstom.
Finmeccanica's train signal systems business is handled by Ansaldo STS, while AnsaldoBreda builds rolling stock.