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Engineering & Construction

Hitachi to divest some of its Hitachi Construction shares

Japan government-backed JIC fund and other parties consider buying the stake

Hitachi is also considering selling a stake in Hitachi Metals, a plan that would complete structural reforms that the corporation began a decade ago.   © Reuters

TOKYO -- Hitachi will sell a part of its stake in subsidiary Hitachi Construction Machinery, Nikkei learned on Friday, as the Japanese manufacturing icon nears the end of a decadelong restructuring effort.

State-backed fund Japan Investment Corporation and other parties are considering buying the stake.

The move is part of Hitachi's recent strategy to sell listed subsidiaries that have little synergy with information technology, a key growth driver for the company.

Hitachi is also considering selling a stake in Hitachi Metals. If these plans are realized, they would complete structural reforms that Hitachi began a decade ago.

Hitachi Construction Machinery is listed on the first section of the Tokyo Stock Exchange. Hitachi owns around 51% and is considering a sale of half of this stake.

The stock price of Hitachi Construction Machinery is around 3,700 yen ($35) per share, twice as high as it was in late March. It is likely that Hitachi will sell the stake at a discounted price.

Hitachi Construction Machinery develops automatic driving systems for machinery used on large construction jobs. The machinery is equipped with Lumada, Hitachi's proprietary Internet of Things platform.

As Hitachi still sees a certain level of synergy with Hitachi Construction Machinery, it will continue to keep a certain stake and maintain a cooperative relationship.

Though Hitachi Construction Machinery no longer will be a subsidiary of Hitachi, it will continue to leverage Hitachi's brand on its global expansion drive.

In 2009, Hitachi owned 22 listed subsidiaries. After it posted a 787.5 billion yen ($8.03 billion) loss for the fiscal year through March 2009, Hitachi began a structural reform drive, part of which entails reorganizing its listed subsidiaries to enhance its global competitiveness.

In April, Hitachi sold Hitachi Chemical, known as one of Hitachi's three core subsidiaries, to Showa Denko. After Hitachi took a full stake in Hitachi High-Technologies Corporation, Hitachi Construction Machinery and Hitachi Metals remained Hitachi's only listed subsidiaries.

Hitachi has stated that it will decide whether to incorporate or sell its listed subsidiaries by the end of this fiscal year, through March, when the current midterm management plan ends.

"If we stayed the same, we would have taken a huge loss again in this coronavirus crisis," Hitachi CEO Toshiaki Higashihara told Nikkei Asia in a recent interview.

The company expects sales of about 7.8 trillion yen this fiscal year, almost 1 trillion yen less than last fiscal year's 8.7 trillion yen in sales. It expects to remain profitable, with an operating profit margin of about 5%.

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