Mitsubishi Heavy, Hitachi to combine power system businesses

Thu Nov 29, 2012 5:40am EST
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By Mari Saito

TOKYO (Reuters) - Mitsubishi Heavy Industries (7011.T: Quote) and Hitachi Ltd (6501.T: Quote) are to combine their thermal power businesses to compete against overseas rivals Siemens (SIEGn.DE: Quote) and General Electric (GE.N: Quote), which are winning deals even in the Japanese firms' backyard.

The deal, in which Mitsubishi Heavy will take 65 percent in a new company, also revives Hitachi's efforts to absorb some of its local rival's infrastructure business to give it the scale to expand beyond a stagnant home market.

The announcement comes more than a year after the two firms called off talks to merge their infrastructure businesses. Talks to combine the thermal power businesses began late this summer.

The new company, with Hitachi taking the remaining 35 percent, will bring together the two firms' gas turbine and other fossil-fuel power generation equipment businesses, and will be completed by January 2014.

For now, it excludes nuclear power - where Mitsubishi Heavy has an alliance with France's Areva SA (AREVA.PA: Quote), the world's biggest maker of nuclear plants. But Mitsubishi Heavy CEO Hideaki Omiya told a joint news conference in Tokyo that his firm will explore partnerships in other areas with Hitachi, which has a nuclear power venture with GE.

"There are many Japanese companies today that are battling each other domestically and then again with foreign competitors," he said. "Instead of wasting our energy doing that, we should be banding together to become even bigger to take on our foreign rivals."


Hitachi CEO Hiroaki Nakanishi said the tie-up would help the firms become a global leader in a tough business climate and also beat back rising rivals from China and India. He added the deal turned Mitsubishi Heavy from a feared competitor to a trusted partner.   Continued...

The logo of Mitsubishi Heavy Industries Ltd. is seen on the company headquarters in Tokyo September 20, 2011. REUTERS/Toru Hanai