By Olivia Bugault

 

Thales SA said Wednesday that it has entered into exclusive negotiations with Japanese conglomerate Hitachi Ltd.'s subsidiary Hitachi Rail for the sale of its ground transportation systems business for an enterprise value of 1.66 billion euros ($1.97 billion).

The transaction, which would be completed by the end of 2022 or the beginning of 2023 and will be paid in cash, will strengthen Thales's balance sheet and its focus on three main markets: aerospace, defense, and digital identity and security, it said.

After the sale, the French aerospace-and-defense company now targets an earnings before interest and taxes margin of 12% in the medium-term.

Thales also updated its 2021 outlook as its transport segment will be considered as discontinued operations. The company said it now expects 2021 sales to come between EUR15.8 billion and EUR16.3 billion compared with a previous range of between EUR17.5 billion and EUR18 billion, while it now targets an EBIT margin of 9.8% to 10.3%. That compares to a previous forecast of 9.5% to 10%.

Thales's and Hitachi's boards of directors approved the deal and "the final purchase price will be determined after customary adjustments for net working capital and net debt based on actual amounts at the closing date," Thales said.

 

Write to Olivia Bugault at olivia.bugault@wsj.com

 

(END) Dow Jones Newswires

August 04, 2021 01:50 ET (05:50 GMT)

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