Thales, Europe's largest defence electronics company, said it was in advanced talks to sell its GTS 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 company looks to streamline its sprawling operations and reassure investors of its core focus on making high-tech equipment for the defence and aerospace industries.
Thales shares were up 1.1% in early trading.
"With this major strategic move, we will be able to focus on the development of our 3 high-tech long-term growth businesses, each of them able to sustainably deliver double-digit margins,"
said Thales Chairman and CEO Patrick Caine in a statement.
Those three businesses are aerospace, defense & security, and digital identity & security.
The price tag of 1.66 billion euros corresponds to the enterprise value, including debt, of Thales' unit, dubbed Ground Transportation Systems (GTS).
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.