Showa Denko to buy Hitachi Chemical

Showa Denko, Japan’s third largest chemical company, has agreed to buy Hitachi Chemical in a deal worth up to $8.8 billion. This is the latest consolidation to reshape Japan’s industry, following on from the merger of Nippon Shokhubai and Sanyo Chemical Industries in Synfomix. The tender is due to start in February, though this may change depending on the approvals process.

The deal is said to be driven by Showa Denko’s need to scale up its lithium-ion battery and advanced materials businesses in order to compete with Chinese and Middle Eastern players in these rapidly growing markets. Synergies of around $825 million are anticipated over the course of three years. 

Hitachi, whose board is recommending the deal to shareholders, has been selling non-core businesses with a view to focusing on making equipment and data services linked to internet-of-things technologies. It has also recently sold its diagnostics imaging unit to Fujifilm. 

Showa Denko will fund the acquisition mainly from bank loans. The company said that it aims to establishing itself as a ‘koseiha’ company, with businesses “where we can maintain their profitability and stability at high levels”, of suitable size and in areas where world market leadership can be attained. It claims to have such businesses in high-purity electronic gases, media for hard disk drives and graphite electrodes. By 2025, it plans for half of the portfolio to be ‘koseiha’.

“The planned merger of the two companies with high compatibility in goals and business strategies will mean the birth of a new leading material producer aiming to provide solutions and having many businesses with leading market shares,” Showa Denko stated.