Britain’s competition watchdog has said it would give the green light to a 1.5 billion pounds (1.8 billion dollars) takeover of Thales’s rail infrastructure.
The takeover was after buyer Hitachi agreed to sell off its mainline signaling businesses in the UK, France and Germany to appease concerns over the deal.
The Competition and Markets Authority (CMA) said it considered the move to be “an effective and proportionate remedy”.
Proportionate remedy after the earlier finding of the tie-up of lessens competition in the supply of mainline rail signaling in Britain.
It said the decision to offload parts of Hitachi’s rail assets would preserve competition and ensure customers, such as Network Rail, will not be negatively affected by the merger.
But the CMA stressed that it will still have to approve the buyers of the businesses being put up for sale.
And that Hitachi’s key customers in these countries will also need to agree to the transfer of the signaling contracts.
The CMA said in August that it was no longer concerned over the impact of the takeover on the London Underground signaling sector after new evidence came to light.
But confirmed competition concerns in the supply of mainline rail signaling in the UK.
Stuart McIntosh, chairman of the CMA’s independent inquiry group, said “Effective signaling is vital for safe and reliable rail travel.
This is why it was important for us to review this merger thoroughly before reaching a final decision.
“We have concluded that the merger will not reduce competition to provide CBTC (communications based train control) signaling systems, and in particular those required on the underground network in London.
“The picture is not the same for digital mainline signaling.
“To address our concerns here, Hitachi is selling part of its existing mainline signaling business to an independent purchaser.
“This will protect competition, which is key to keeping costs down, maintaining high quality of service and promoting innovation.”
The deal involved two of the leading suppliers of signaling systems for mainline and urban railway networks.
The CMA warned in June that the takeover could drive up prices and reduce service quality for passengers.
That it would also see Network Rail and the London Underground lose out on digital signaling options because it would lessen competition in the market.
The CMA added that the merger could raise costs for Network Rail.
The industry is already highly concentrated with a small number of suppliers, with Siemens and Alstom the only other two leading firms.
An in-depth probe was launched in December after the watchdog raised concerns over the deal.
Hitachi and Thales began talks over the deal in August 2021, with aimed to close the acquisition within the second half of 2023.
The acquisition was also being investigated by the European Commission.
Thales said it recently resubmitted amended proposals with the European regulator and now hopes to get final approval for the deal by early November.
A Hitachi Rail spokesman said: “having gained clearance from the CMA, we are now focused on achieving the final anti-trust clearance from the European Commission.
“We believe strongly in the competitive benefits of the deal to acquire Thales’s Ground Transportation Systems, which will deliver value for customers in the rail signaling and mobility sectors in Europe and around the world.
