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COURTESY HART
HART initially envisioned a flexible system that could accommodate two
Hitachi Ltd. is buying the Italian train manufacturer contracted to design, build, operate and maintain Honolulu’s rail transit system.
The Japanese industrial group, which makes nuclear power equipment, rail systems and industrial machinery, will purchase Finmeccanica’s stake in Ansaldo STS SpA and AnsaldoBreda SpA in a deal valued at $2.2 billion.
Finmeccanica owns all of AnsaldoBreda, which is unprofitable, and 40 percent of Ansaldo STS, which is profitable.
The two Ansaldo companies formed a joint venture, Ansaldo Honolulu JV, to design and build the 20-mile, 21-station elevated train system for Oahu under a $1.4 billion contract. Finmeccanica, an Italian defense company, has been trying to sell off its rail assets for the past several years.
Rome-based Finmeccanica had said in November it received an offer from the Japanese group.
Honolulu Authority for Rapid Transportation officials have repeatedly sought assurances from Finmeccanica and local Ansaldo Honolulu officials that any sale would not disrupt or delay the project, which currently faces as much as a nearly $910 million shortfall.
Last year, HART Executive Director Dan Grabauskas requested that Finmeccanica CEO Alessandro Pansa explain the firm’s “plans with respect to AnsaldoBreda and Ansaldo STS, and to provide further assurances of both their performance and Finmeccanica’s continued support for our project.”
“We remain concerned with (Ansaldo Honolulu’s) ability to deliver sufficient vehicles and a fully functioning controls system in time to support our planned opening of the first 10 miles of railway in 2017,” Grabauskas added in that February 2014 letter.
Pansa replied that “Ansaldo Honolulu JV is fully committed to this project” and “will deliver … a world-class transit system on time, on budget and high in value.”
In October, Ansaldo Honolulu JV project manager Enrico Fontana told the HART board that the system’s first driverless train is slated to arrive on island for testing in June 2016.
Hitachi has sought to expand overseas as most of Japan’s nuclear power plants remain shut after the 2011 earthquake and tsunami led to radiation leaks at a facility on the northeast coast. Finmeccanica Chief Executive Officer Mauro Moretti is selling the rail unit to focus on faster-growing helicopter, aerospace and defense-electronics businesses and is cutting debt at the company, which is owned 32 percent by the state.
Hitachi’s purchase further consolidates an industry that started concentrating in 2012, when Germany’s Siemens AG announced the purchase of Invensys Plc’s rail-signaling business. China’s CSR Corp. Ltd. agreed last year to acquire smaller competitor China CNR Corp. Ltd., while Alstom SA plans to buy the rail-signaling business of General Electric Co. as the U.S. company buys the power-equipment units of the French trainmaker.
European trainmakers posted stagnant profits in recent years amidst rising Asian competition and constrained public investments in their home markets. Hitachi, which builds key parts of Japan’s Shinkansen bullet train, is seeking growth abroad and European orders for express and commuter trains.
“This is a good chance to gain strength and join the ranks of the global companies in a large market, starting with railways — an area where Japan is strong,” said Minoru Matsuno, president of Value Search Asset Management Co. in Tokyo. “This goes along with the trend of aggressive exports of social infrastructure on the back of Abenomics.”
Hitachi will start a mandatory tender offer for the remaining shares of Ansaldo once the transactions are completed, it said in the statement.
AnsaldoBreda, with four plants and 2,300 workers, is a leader in driverless metro trains, delivering the first system of its kind to Copenhagen in 2002 and completing initial work for the Honolulu contract last year. It’s also building 50 Frecciarossa ETR 1000-model high-speed trains for Ferrovie, its main customer, in a $1.7 billion contract shared with Canada’s Bombardier Inc.
Finmeccanica had failed to sell AnsaldoBreda to Hitachi in 2012, while China CNR Corp. and Insigma Technology Co., Bombardier, General Electric and Thales SA had also expressed interest.
Hitachi had cash and equivalents of about 753 billion yen as of Dec. 31, its highest level since 2009, 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.
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Bloomberg News contributed to this story.
