TOKYO -- Hitachi is preparing to unload operations in power tools and semiconductor fabrication equipment, further narrowing its focus and resources with the aim of bolstering earning power in an uncertain global economy.
The Japanese industrial titan seeks to sell Hitachi Koki and a portion of Hitachi Kokusai Electric for a total of more than 100 billion yen ($972 million). Hitachi hopes to widen its operating profit margin -- which already bested those of domestic rivals at about 6% for the fiscal year ended this March -- and to strengthen its competitiveness on the global stage.
Hitachi and units together own more than half of Hitachi Koki's outstanding shares, including treasury stock held by the power tool maker. Hitachi has initiated a bidding process with a goal of unloading the stake by the first half of 2017. The sale could total more than 50 billion yen. U.S. investment fund Carlyle Group is among those interested.
There are also plans to sell Hitachi Kokusai's chipmaking equipment business next year. Hitachi could first buy all of Hitachi Kokusai's remaining shares on the market via a tender offer, then spin off the chipmaking equipment business. Hitachi could also directly sell a portion of its stake in the unit to another company.
Japanese electronics makers are trying to regain competitiveness by focusing on profitable businesses rather than expanding sales. Panasonic is concentrating on housing and automotive offerings, while Sony is going on the offensive in its entertainment business and digital equipment.
Hitachi is shifting focus to infrastructure and information technology equipment, and particularly to such related services as maintenance, management and consulting. Because its power tools and chipmaking machinery businesses focus more on the sale of equipment than on services, the company has decided that they do not fit the broader group strategy.
Chasing American and European giants
Hitachi also hopes that the sale will breathe new life into restructuring efforts some say have stalled. It accepted investments by SG Holdings and Mitsubishi UFJ Financial Group this year in its logistics and leasing arms, respectively. It will continue pursuing fundamental reforms for noncore businesses, including selling them off.
Hitachi sold its hard-drive business in 2012 and also spun off operations in liquid crystal display panels, honing its focus under then-President Hiroaki Nakanishi to create a revenue base competitive with those of such Western titans as General Electric.
The Japanese company in 2014 relisted electronics maker Hitachi Maxell, which had been made a wholly owned subsidiary back in 2010. It turned its business in thermal power generation systems into a joint venture with Mitsubishi Heavy Industries in 2014, and its air conditioning business into a joint venture with U.S.-based Johnson Controls in 2015.
Hitachi logged a 787.3 billion yen group net loss for the fiscal year ended March 2009, a record low for a Japanese manufacturer. It has since both restructured and focused more on providing services than products.
But Hitachi believes that it needs an operating profit margin of about 10% to truly compete with American and European players. It had been scouring the group for more nonessential operations to cut.
In response to the Chinese economic slowdown, the company plans to also overhaul its cost framework. It stands at a critical juncture for whether it can return to a growth trajectory.