Mitsubishi Heavy Industries and Hitachi Reach a Basic Agreement on Business Integration

The global market has continued to expand, driven by the growth engines of China and other emerging countries. Heightened environmental awareness around the world has presented a major opportunity for MHI and Hitachi to expand businesses where they both excel—businesses that solve global energy and environmental issues at the same time. These sources of buoyant demand require that companies respond in detail based on highly advanced technologies, quality and reliability, unfettered by the traditional frameworks of companies. In this regard, they must be able to harness engineering capabilities as well as sales and service capabilities closely tied to each region.

MHI and Hitachi share the same corporate credo of "Contribute to society through the development of superior, original technologies and products." Over the years, the two companies have established partnerships harnessing their technical skills and expertise in a variety of fields. Examples include an alliance and subsequent establishment of a joint venture in the steel production machinery field; the collaboration in the overseas railway systems business; and the integration of the hydroelectric power generation system business. Another example has been joint support for the Fukushima Daiichi Nuclear Power Station of Tokyo Electric Power Company.

Based on the extensive partnership, the two companies have reached a basic agreement on business integration to address buoyant global demand for thermal power generation systems by harnessing superior technical skills, quality and reliability, with the aim of prevailing against intensifying global competition. The two companies aim to expand this business by swiftly reaping integration benefits. This will be done by consolidating their respective businesses centered on thermal power generation systems within a joint venture company by January 1, 2014. MHI and Hitachi will take equity interests of 65% and 35%, respectively, in the joint venture company. Furthermore, the integration process will see the two companies rapidly co-organize an Integration Preparation Committee, with the view to cooperating on promoting the work needed to achieve the integration.

In the thermal power generation field, the two companies both have expansive product lineups. For example, in gas turbines, MHI has focused on highly efficient large models in recent years. Meanwhile, Hitachi sees its mainstay products as small and medium-sized models. Regionally, MHI has strengths mainly in Southeast Asia and the Middle East, while Hitachi has harnessed its strengths in markets such as Europe and Africa. The two partners will strive to leverage the complementary strengths of both companies. Moreover, the two companies will further enhance their ability to address customer needs and provide services by taking advantage of their respective strengths in providing total solutions across all aspects of thermal power plants.

Through this agreement, MHI and Hitachi will develop a stable and efficient management base for the new company, while accelerating global business expansion by pursuing synergies through business integration. At the same time, the two companies will make the most of their collective capabilities, along with synergies and complementary strengths in technologies and product businesses. In this process, both companies aim to establish a leading global company in the thermal power generation systems field.

Further details, including an outline of the new company, will be announced as soon as they are determined.

Overview of the business integration

The impact of the business integration on the business results of MHI and Hitachi will be announced when it becomes clear.