Hitachi said to eye stake sale in US$1.9b Kokusai unit

[LONDON] Hitachi Ltd is considering a sale of its controlling stake in Hitachi Kokusai Electric Inc that could ultimately lead to a takeover of the entire unit, people familiar with the matter said.

Hitachi Kokusai, which produces equipment for semiconductor makers and wireless-network gear manufacturers, has drawn interest from potential bidders, said the people, who asked not to be identified because the discussions are private. The deliberations are at an early stage, and Hitachi may decide against a sale, the people said. Hitachi Kokusai had a market value of about US$1.9 billion as of Monday.

Hitachi, Japan's second-largest manufacturer, is reviewing its portfolio amid a slowdown in demand from China as well as oil- and gas-producing countries, hit by low prices for crude.

Chief executive officer Toshiaki Higashihara said in April that he plans to spin off non-core units while focusing on digital technology to help boost sales in its car parts, train and energy businesses. Hitachi owns just over 50 per cent of Hitachi Kokusai.

Hitachi Kokusai's shares rose 6.2 per cent to 1,913 yen in Tokyo Tuesday, the biggest gain since August. Hitachi gained 1.6 per cent to 472.4 yen.

"Hitachi Kokusai has superior technology that will become mainstream in the next generation of semiconductor manufacturing," Kazuyoshi Saito, a Tokyo-based equity analyst at Iwai Cosmo Securities Co, said by phone Tuesday. "It is an attractive company. I think several international firms would want to buy the stake."

Hitachi Kokusai's sales for the year ended in March fell 2.4 per cent to 180.7 billion yen (S$2.4 billion), according to the company's annual report. Net income dropped 26 per cent to 13 billion yen.

The company said it failed to meet its targets for its video and wireless network segment last year because of "rapid change in the business environment." The eco- and thin-film processing unit, which serves the semiconductor industry, reported its highest-ever sales, the company said.

Kazuya Sasaki, a spokesman at Hitachi Kokusai, said he wasn't in a position to comment on any plan by its controlling shareholder.

Hitachi is also exploring a sale of its stake in power-tool maker Hitachi Koki, according to one person with knowledge of the matter. The stake would be valued at about 50 billion yen, said the person. Several companies including Carlyle Group LP have expressed interest in Koki, the person said.

Hitachi has set a deadline for stake sales of early 2017, the person said. Nothing has been decided, and the company may decide not to sell.

"We are always considering various measures to strengthen the company," said Masayuki Takeuchi, a Tokyo-based spokesman for Hitachi, declining to comment further on plans for the units.

A representative for Carlyle Group declined to comment on its possible interest in Hitachi Koki, while a representative for Koki didn't respond to a request for comment outside regular business hours.

BLOOMBERG