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Hitachi Ltd. to sell half of its stake in Hitachi Construction Machinery

Hitachi Ltd. is selling about half of its share in Hitachi Construction Machinery (HCM).

On Jan. 14, Hitachi Ltd. announced it will sell 55,290,000 of its 109,352,310 common shares in HCM to JIP Consortium SPC and ITOCHU Corporation for 182.4 billion yen (CDN$2 billion).

Before the sale, Hitachi Ltd. held a 51.5 per cent voting rights ratio in the construction equipment manufacturing company. Following the share transfer, Hitachi will hold 25.4 per cent of voting rights in HCM.

After the share transfer, HCM will become an equity-method associate, and will not be consolidated by Hitachi.

“Hitachi and HCM have considered measures to achieve further growth and enhancement of corporate value of HCM,” Hitachi Ltd. said in a media release.

“As part of that consideration, Hitachi engaged in discussions with JIP and ITOCHU as new partners who can support the growth of HCM from a medium- to long-term perspective.”

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JIP has an extensive track record of investments and partnerships in Japan, while ITOCHU has construction machinery knowledge in the industry.

“Hitachi believes that HCM’s aiming for further growth through collaboration with the two companies with such strengths will lead to an enhanced corporate value of HCM,” the media release explained.

Hitachi plans to continue collaboration with HCM as it aims for further expansion of the Lumada business – a subsidiary focused on advanced digital solutions, services and technologies for turning data into insights. The two companies expect to work together on research and development for IoT and business that utilizes digital technologies.

“With the support of JIP and ITOCHU, HCM will accelerate global business expansion, contributing to enhance the value of the Hitachi brand, mainly overseas, and the expansion of the Lumada business,” Hitachi said in the news release.

Hitachi Ltd. plans to use the funds generated through the sale of shares to strengthen its financial base, returning it to shareholders and invest in growth opportunities.