Bloomberg News

Mitsubishi Heavy, Hitachi Agree to Merge Thermal-Power Units

November 29, 2012

Mitsubishi Heavy Industries Ltd. (7011) and Hitachi Ltd. (6501) agreed to merge power-equipment businesses with combined sales of 1.1 trillion yen ($13 billion) to bolster their product line-ups and global sales reach.

Mitsubishi Heavy will take a 65 percent stake in the new thermal-power venture, with Hitachi holding the rest, according to a statement from the two Tokyo-based companies today. Operations will begin in January 2014.

The combination will unite Mitsubishi Heavy’s focus on large gas turbines with Hitachi’s expertise in smaller models. The new business will compete with Siemens AG and General Electric Co. as economic growth in Asia spurs demand for electricity-generating equipment.

“It’s very positive,” said Masayuki Kubota, who oversees the equivalent of $1.8 billion in assets in Tokyo at Daiwa SB Investments Ltd. “The businesses have growth potential and merging with each other gives them a stronger competitive edge.”

Mitsubishi Heavy’s earned 36 percent of sales from its power-systems unit in the six months ended September. The figure for Hitachi was less than 10 percent.

The two companies already have a venture that makes steelmaking equipment and another selling trains overseas. They also last year agreed to combine hydroelectric-power equipment units along with Mitsubishi Electric Corp.

Mitsubishi Heavy last year broke off talks about merging a number of units with Hitachi after media reports, a person familiar with the matter said at the time. Footage on TBS had shown Hitachi President Hiroaki Nakanishi saying “yes” when asked whether discussions were under way.

Separately, Mitsubishi Heavy agreed to sell its forklift- making unit to affiliate Nippon Yusoki Co. (7105) in return for new shares. Mitsubishi Heavy will own 49 percent of the voting rights in Nippon Yusoki following the deal.

To contact the reporters on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net; Kiyotaka Matsuda in Tokyo at kmatsuda@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net


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