Thales plans to sell its Railway Signalling Business

Paris, France (Urban Transport News): French multinational firm Thales is planning to sell its Railway Signalling Business to streamline operations. "Thales is putting its rail signalling business up for sale in a potential deal worth 1.5 billion euros or more ($1.8 billion) as the French defence and aerospace group seeks to streamline operations," reported Reuters on April 22, 2021.

Thales which is partially owned by the French state makes equipment ranging from anti-jamming devices for fighter jets to airliner navigation beacons, and investors have often questioned the diversity of its portfolio of assets. The signalling business sits in Thales’ transport division, which also supplies fare collection systems and cybersecurity solutions for railway infrastructure.

Sources said that proceeds from the divestiture would help bolster Thales’ finances after the COVID-19 crisis dented sales and profits last year. "Thales is working with Lazard on the divestiture and is expected to shortly send out information packages to potential buyers including Alstom, Hitachi Rail, Stadler Rail, Spain’s CAF and private equity groups," it has been said. However, Thales and Lazard declined to comment on this matter.

"The transport unit last year saw order intake shrink by 6% to 1.6 billion euros as customers delayed rail projects on weak demand during the pandemic. Its EBIT margin improved to 5.3% on cost cuts but still fell short of an 8% target," reported Reuters.

“The H2 2020 margin of 9.1% was encouraging and management seem confident that Transport can achieve high-single digit margins over a full 12 month period, something that hasn’t happened since 2013”, the banker said in a note to clients. The unit is small compared to competitors and its margin is lower than that of other Thales businesses and rivals.

Sources said that Thales has finished putting together a so-called vendor due diligence on its signalling business, prospective buyers will only be able to make their own assessments on the unit at a later stage.

It has been said that valuation estimates range from 1.5-2.5 billion euros due to the unclear stage of restructuring and future growth prospects.

Thales has recently launched a new digital signalling solution SelTrac G8 for the Rail & Metro industry.