Hitachi Agrees to Sell Metal Unit to Bain Group for $3.5 Billion

Japanese industrial conglomerate Hitachi Ltd. will sell its stake in listed unit Hitachi Metals Ltd. to a group led by Bain Capital for 382 billion yen ($3.5 billion).

Hitachi, which owns more than half of the unit, will sell its stake at 1,674 yen per share, the Tokyo-based company said in a statement on Wednesday. Bain also plans to launch a tender offer in November at 2,181 yen apiece to acquire shares in Hitachi Metals that the parent doesn’t own. Bain is expanding in Japan, along with Carlyle Group Inc. and KKR & Co., as competition heats up among the world’s biggest private-equity firms to win deals from businesses undertaking overhauls. Bain will conduct the deal in a consortium with Japan Industrial Partners and Japan Industrial Solutions, according to the statement.

With the sale of the metal unit, Hitachi Ltd. is closer to completing the restructuring of its listed units, leaving it with Hitachi Construction Machinery Ltd., a maker of digging machines and mining trucks. The 111-year-old Japanese company has been overhauling its business sprawling from kitchen appliances to power grids over the past decade to boost its margin. Hitachi exited a $26 billion U.K. nuclear power project in September, and signed a string of multibillion-dollar deals, including the buyout of Hitachi High-Tech Corp., and most recently the $9.6 billion purchase of U.S. software development company GlobalLogic Inc.

The parent’s consolidation comes at a tough time for Hitachi Metals, which has suffered a hit to its earnings from the pandemic and the revelation of falsified quality test results last year. The company had a second straight annual loss in the fiscal year ended March and is pushing through structural reform, including 3,200 job cuts, or 9% of its workforce, by March 2022.

Hitachi Metals closed up 0.6% in Tokyo, with the deal announced after stocks markets closed. Bain’s tender offer represents 15% premium over the closing price of 1,895 yen.