LONDON (Reuters) - British engineering group Invensys ISYS.L has sold its rail business to Germany's Siemens (SIEGn.DE) for 1.74 billion pounds ($2.8 billion), allowing it to return cash to shareholders and reduce its pension deficit.
The British company on Wednesday said the sale of Invensys Rail, which makes rail signaling systems, would allow it to return 625 million pounds, or 76 pence per share, to its investors.
Invensys shares in London, which have fallen 9 percent in the last three months, closed up 27 percent at 280 pence on Wednesday, valuing the group at around 2.28 billion pounds.
The company also said it reached an agreement with the trustee of its pension scheme to pay 400 million pounds into its pension scheme and put 225 million pounds into a reservoir trust.
"Following a strategic review which highlighted the likely consolidation in the global rail signaling market and the limited scope to increase the size of the Invensys Rail business, we have decided to refocus the group around our industrial software, systems and control equipment business," Invensys Chief Executive Wayne Edmunds said.
Invensys also makes industrial systems for nuclear power stations and oil and gas plants, and controls for domestic appliances. Its pension fund had a net deficit of 426 million pounds at the end of March, although its total liabilities were far higher than that, according to analysts.
Siemens, Germany's most valuable company which makes products ranging from fast trains and gas turbines to hearing aids, has come under pressure to cut costs and focus on its most profitable businesses to close a gap with rivals such as ABB (ABBN.VX) or General Electric (GE.N).
(Reporting by Rhys Jones; Editing by Mike Nesbit)