Hitachi Ltd. is set to buy Finmeccanica SpA’s rail business and a signals affiliate in its largest ever overseas acquisition as it seeks growth abroad.
The Japanese industrial group, which makes nuclear power plant turbines, electronic equipment and industrial machinery will close the acquisitions of AnsaldoBreda SpA and Ansaldo STS SpA later this year, the companies said in a joint statement. Finmeccanica said in November it had received an offer from the Japanese group.
Hitachi has sought to expand overseas as Japan’s population declines and most nuclear power plants in the country remain shut after the 2011 earthquake and tsunami led to a triple meltdown at Tepco’s Fukushima No. 1 nuclear power plant. Finmeccanica Chief Executive Officer Mauro Moretti is selling the rail unit to focus on faster-growing helicopter, aerospace and defense-electronics businesses and cutting debt at the company owned 32 percent by the state.
“This deal got my attention, so I’m watching how Hitachi will add value to the rail business and compete globally from now,” said Masayuki Doshida, senior market analyst at Rakuten Economic Research Institute in Tokyo. “So far, the market hasn’t appreciated this purchase.”
Hitachi shares fell 0.8 percent to ¥828.2 in trading in Tokyo on Tuesday, bringing its decline to 8.1 percent this year. This compares with a 6.6 percent gain in the benchmark Nikkei 225 average.
AnsaldoBreda, with four plants and 2,300 workers, is a world leader in driverless metro trains, delivering the first system of its kind to Copenhagen in 2002 and completing initial work for a Honolulu contract last year. It is also building 50 Frecciarossa ETR 1000-model high-speed trains for Ferrovie, its main customer, in a 1.5 billion euro ($1.7 billion) contract shared with Canada’s Bombardier Inc.
Finmeccanica had failed to sell AnsaldoBreda to Hitachi in 2012, while China’s CNR Corp. and Insigma Technology Co., Bombardier, General Electric Co. and Thales SA had also expressed interest.
Hitachi had cash and equivalents of about ¥753 billion, the highest since 2009, as of Dec. 31, according to data compiled by Bloomberg. The Tokyo-based company has spent about $3.8 billion on acquisitions over the past three years, including the AnsaldoBreda deal, with $3.3 billion spent on companies in Europe, the data show.