PARIS - Thales , Europe's largest defence electronics company, confirmed on Wednesday it was in advanced talks to sell its railway signalling business to Japan's Hitachi in a deal that values the division at 1.66 billion euros ($2 billion).
The sale comes as the French firm looks to streamline its sprawling operations and reassure investors of its focus on the core business of making high-tech equipment for the defence and aerospace industries.
Reuters reported the talks last week.
The price tag of 1.66 billion euros corresponds to the enterprise value, including debt, of Thales' unit, dubbed Ground Transportation Systems.
It reflects a multiple of 13.8 times of the unit's twelve-month earnings before interest and taxes (EBIT), Thales said in a statement, adding that it expected the deal to close by the end of 2022 or the start of 2023.
The signalling unit, which also offers train control systems and fare collection services, is small compared with competitors.
The sale comes at a time of consolidation in the industry as independent players align themselves with bigger industrial groups.
In January, French train maker Alstom closed its 5.5-billion-euro acquisition of Bombardier's rail business, making it the industry's No. 2 worldwide, after China's CRRC.
(Reporting by Gwenaelle Barzic, Sudip Kar-Gupta and Mathieu Rosemain; Editing by Tom Hogue and Clarence Fernandez) ((firstname.lastname@example.org; +33 1 49 49 53 84;))