Hitachi-Mitsubishi merger talks crumbling

Hitachi and Mitsubishi Heavy Industries are ready to walk away from merger talks, sources with knowledge of the matter said on Friday, dashing hopes for a groundbreaking marriage of two of Japan’s oldest conglomerates.The suspension of talks comes after news first surfaced on Thursday that the two companies, which can trace their histories back more than 100 years, were discussing a limited combination of some businesses such as next-generation power operations and smart grids, with an eye towards a complete merger later on.Three sources told Reuters on Friday that talks had stalled because Hitachi is keen to pursue a full merger while Mitsubishi Heavy prefers combining selected operations. A Mitsubishi Heavy spokesman said on Friday it had nothing new to say other than it had no plan to agree to a merger. Hitachi officials were unavailable for comment.Shares of both companies fell on Friday as investors learned of the looming failure of the talks. Shares of Hitachi fell 4 percent in early trading while Mitsubishi shares fell 4.7 percent. “Both Hitachi and Mitsubishi Heavy have a long history and it means their corporate cultures are very different and that makes an merger tough,” said Mitsuhige Akino, chief investment manager at Ichiyoshi Investment Management.“They should aim for a full-blown merger and if they did, that would act as a catalyst for other Japanese firms,” he added.A merger would create a $150 billion revenue infrastructure firm second only to General Electric and could provide the impetus for cost cuts, which are essential if the two companies are to cope with a strong yen and fierce global competition.According to Thomson Reuters data, a takeover of Mitsubishi Heavy, including its debt, could cost Hitachi around $28 billion, topping Softbank’s $17.5 billion purchase of the Japanese unit of Vodafone Group in 2004.“We think Hitachi’s interest in a merger may have been prompted by concern over the poorer competitiveness of its core social infrastructure business,” Deutsche Securities analyst, Takeo Miyamoto, said in a report.Hitachi, a sprawling conglomerate with 900 group companies that make everything from rice cookers to nuclear reactors, forecasts annual sales this business year of 9.5 trillion yen ($120 billion). From / Gulf Today