The U.S. and Japanese funds together aim to acquire all Hitachi Kokusai shares through a tender offer estimated to exceed 200 billion yen ($1.8 billion). The open-market takeover will begin as soon as next month, with Hitachi Kokusai slated for delisting. Hitachi will sell its entire 50%-plus stake.
When Hitachi first put Hitachi Kokusai up for sale in the latter half of 2016, a group of mainly non-Japanese funds submitted bids. Hitachi granted the KKR-JIP alliance preferential negotiating rights chiefly because of a superior offer amount. Both sides are busy finalizing the agreement, which will be announced as soon as Wednesday.
Along with chipmaking devices, Hitachi Kokusai also makes broadcasting and video equipment. As a company listed on the Tokyo Stock Exchange's first section, it earned a group operating profit of 16.1 billion yen and sales of 180.7 billion yen in the year ended in March 2016.
Semiconductor equipment account for the majority of sales, and the business is expanding in Asia. South Korea's Samsung Electronics is a main client. Earnings across the board have been healthy. A proposal that has been floated calls for keeping the broadcasting and video segment within the Hitachi group.
Hitachi has been unloading noncore operations in order to concentrate on its infrastructure and information technology segments. Last year, the conglomerate sold portions of its stakes in Hitachi Transport System and Hitachi Capital, and decided in January of this year to sell off power tool unit Hitachi Koki.
Because Hitachi Kokusai's affinity with other group companies has faded, the parent determined that the subsidiary would be better off pursuing growth through a tie-up with outside investment funds.
Hitachi will direct the capital gained from the sale toward growth investments and core businesses. The group plans to spend 1 trillion yen on acquisitions over the two years to fiscal 2018. The sum -- triple the scale of the past two years -- will be mostly devoted to buying foreign infrastructure companies.
Although Hitachi is considered one of Japan's more successful electronics companies, its profit margins are narrower than those at U.S.-based General Electric and Germany's Siemens. Hitachi intends to bridge the gap by beefing up "internet of things" services and other profitable operations.