Hitachi has agreed to buy Italian conglomerate Finmeccanica's rail and signal assets, sources said, in a deal expected to top US$2 billion that will give the Japanese company a stronger foothold in Europe to compete with bigger rivals. For Hitachi, which relocated its rail division to London last year, the main focus of the deal is rail signal system unit Ansaldo STS, a profitable business that would help it sell combined carriage and signals packages as well as give it a manufacturing presence in continental Europe. The transaction will also include loss-making train company AnsaldoBreda - a unit the Italian state-controlled industrial conglomerate was keen to bundle in the sale as it focuses on its core business areas of aerospace, defence and security. Damian Thong, an analyst at Macquarie Capital, said a key challenge for Hitachi would be avoiding labour strife as it considered how best to restructure the units. "They'll try to keep workers conscious of the fact that they're in there for the long haul," Thong said. "I doubt they'll go in and do a clean sheet restructuring. That may help them reduce confrontation in labour management." A deal, which would thwart a rival offer from China's Insgima Group, would be the latest in a string of overseas acquisitions by Japanese companies seeking to escape low-growth prospects at home as the country's population rapidly ages. "It's a symbolically meaningful deal for Hitachi," Thong said. "I do expect this to signal further investments in Europe." An agreement was poised to be signed soon after receiving the approval at a Finmeccanica board meeting on Friday, one source said. Finmeccanica has full control of AnsaldoBreda and owns 40 per cent of Milan-listed Ansaldo STS. The sale of the stake will trigger a mandatory takeover offer by Hitachi for the whole signal unit, which has a market value of €1.77 billion.