Hitachi Offers to Buy Out Units for 282.2 Billion Yen

Hitachi Ltd., Japan’s third-largest manufacturer, offered to buy out five publicly traded subsidiaries and affiliates for 282.2 billion yen ($3 billion) to help speed up business decisions and reduce overlapping costs.

The company will acquire outstanding shares of Hitachi Maxell Ltd., Hitachi Software Engineering Co., Hitachi Information Systems Ltd., Hitachi Plant Technologies Ltd. and Hitachi Systems & Services Ltd., according to statements to the Tokyo Stock Exchange today.

President Takashi Kawamura aims to lower costs by 500 billion yen this fiscal year by cutting jobs, separating some operations and merging its unprofitable chip unit with another semiconductor maker. Hitachi, recovering from a record annual loss, plans to reduce more than 100 units by March 31.

“Investors have no idea what the company wants to focus on. By buying out the units, Hitachi’s made it even more ambiguous,” said Seiichiro Iwamoto, who helps manage $977 million of Japanese stocks at Mizuho Asset Management Co. in Tokyo, which owns Hitachi shares. “I’m doubtful the company will gain from what they spend to buy those affiliates.”

Hitachi fell 3.6 percent to close at 293 yen on the Tokyo Stock Exchange. The stock has lost 15 percent this year, while the benchmark Nikkei 225 Stock Average has climbed 14 percent.

Shares Rise

The Nikkei newspaper reported yesterday Hitachi may spend 300 billion yen for the buyouts, sending shares of the five units up by their daily limits in Tokyo trading. The stocks all rose again today.

Hitachi, based in Tokyo, in March spent 26.7 billion yen increasing its stakes in Hitachi Koki Co. and Hitachi Kokusai Electric Inc. Hitachi Mobile Co. and Hitachi Electronics Engineering Co. were bought out and de-listed.

Hitachi today reported an 82.7 billion yen net loss in the three months ended June 30, compared with a 31.6 billion yen profit a year earlier. The operating loss, or sales minus the cost of goods sold and administrative expenses, was 50.6 billion yen, compared with 77.7 billion yen profit a year earlier, as revenue fell 26 percent.

The maker of products ranging from nuclear reactors, household appliances to hard-disk drives kept its May forecast for annual loss to narrow to 270 billion yen this fiscal year.

‘One-Stop Service’

The buyouts of Hitachi Information Systems, Hitachi Software and Hitachi Systems & Services would allow the parent to offer “one-stop service” comprising of data centers, consulting, as well as information-technology software and hardware, the company said. Buying Hitachi Maxell would help speed up the development of lithium-ion batteries for industrial use, the parent said.

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