TOKYO -- Hitachi intends to auction its once-prized chemical subsidiary in a drastic move to pare its sprawling business portfolio and to focus resources on infrastructure and factory automation operations, Nikkei has learned.
The Japanese technology group will start taking bids for Hitachi Chemical as early as May. Domestic rivals Mitsubishi Chemical Holdings, Mitsui Chemicals and Sumitomo Chemical are believed to be interested, as are U.S. buyout firms KKR and The Carlyle Group.
Hitachi Chemical, a core unit 51% owned by Hitachi, commands a sizable share of the global market for encapsulating material for semiconductors, as well as anode materials for lithium batteries. It projects net profit of 32.5 billion yen ($290 million) on 690 billion yen in sales for the year ended in March.
The winning suitor could convert Hitachi Chemical, now listed on the first section of the Tokyo Stock Exchange, into a wholly owned subsidiary through a tender offer. The company's market value totals around 546 billion yen based on Wednesday's closing price of 2,621 yen.
With a premium, the buyer could spend between 600 billion yen to 700 billion yen on the deal. Private equity funds and commercial companies may form a consortium to finance the acquisition.
The transaction also could occur in the form of a share swap between the purchasing entity and Hitachi Chemical.
Hitachi's business empire spans roughly 900 group companies globally. President and CEO Toshiaki Higashihara plans to pare the number to about 500 over a few years through divestments and mergers. The group sold Hitachi Kokusai Electric, a producer of chipmaking devices, to KKR in 2017. Last October, Hitachi announced the sale of car navigation unit Clarion to Faurecia, the French auto parts maker.
At the end of 2009, the group had 22 publicly-traded subsidiaries. Now the tally is down to four. Yet many market analysts still think Hitachi is spread thin, at least compared with competitors like Germany's Siemens.
Hitachi's market capitalization hovers around 3.5 trillion yen, about a third of Siemens' cap. To compete with global rivals, Hitachi must continue to streamline its business profile, critics say.
Historically, Hitachi Chemical was one of three crown jewels within the group, along with Hitachi Metals and Hitachi Cable. Hitachi Metals has since swallowed up Hitachi Cable, and the group has judged the chemical unit to lack the necessary synergy with its future growth strategy. Once Hitachi Chemical is offloaded, the group will enter the finishing phases of its reorganization.
Meanwhile, the group is busy acquiring assets for its infrastructure and "internet of things" segments. Last year, Hitachi decided to buy ABB's power grid operations for over 700 billion yen. On Wednesday, the company announced the purchase of JR Automation Technologies, an American robotic systems integrator, for $1.42 billion.