Japan's Hitachi Ltd will launch a $2.9 billion bid for five of its listed units to help it return to growth, even as a tumble to a quarterly net loss further eats into its capital and intensifies pressure to raise funds.
Japan's biggest electronics maker is trying to consolidate its sprawling operations as it faces its third straight year of losses and weaker finances, shifting its focus to growth in its power systems and infrastructure.
Hitachi said on Tuesday it will launch tender offers next month to buy the shares it does not already own in Hitachi Maxell, Hitachi Plant Technologies Ltd, Hitachi Information Systems Ltd, Hitachi Software Engineering Co and Hitachi Systems & Services Ltd.
Hitachi will pay for the shares almost entirely with cash, with the exception of a 5 percent stake in Hitachi Plant Technologies for which it will conduct a share swap.
The announcement, along with Hitachi's fall to a quarterly loss amid weak microchip and electronics sales, sent its shares down 4 percent even as those of its units jumped from the buyout effect.
Losses will likely continue in the second quarter, and along with the tender offer could deplete Hitachi's cash by 300 to 400 billion yen -- to almost half what it was at the end of March, said Yuichi Ishida, an analyst at Mizuho Investors Securities.
Large losses have already torn into Hitachi's capital base, halving its shareholders' equity ratio in a year and putting pressure on it to raise money.
But if Hitachi tries to raise funds, it will be a hard sell right now, since it has yet to put forward a convincing roadmap back to profitability, Ishida said.
Hitachi, a sprawling conglomerate with more than 900 group firms and 16 listed subsidiaries, hopes to revamp the management of its assets after losing about $8 billion in the past business year, a record for a Japanese manufacturer. It has been eyeing a boost from public funds.
Hitachi stuck to its forecast for a net loss of 270 billion yen for the year to March -- missing the consensus average for a 246 billion yen loss by 13 analysts polled by Thomson Reuters -- even as rivals Fujitsu Ltd and NEC Corp predict a return to profit.
Hit by weak sales of its microchips, consumer electronics, software and even its power systems, it reported a loss of 82.7 billion yen for April-June, its fiscal first quarter.
That compared with a profit of 31.6 billion yen in the same period last year, and just missed an estimate by JP Morgan for a loss of 79.9 billion yen.
It posted an operating loss of 50.6 billion yen, down from a profit of 77.7 billion yen in the same quarter last year, on a 26 percent sales decline.
Sharp cuts in corporate spending worldwide have hurt Hitachi's cash cows such as Hitachi Metals, Hitachi High Technologies and Hitachi Chemical, while the parent company is struggling to restructure its chip and consumer electronics operations.
A planned merger between NEC Electronics and Hitachi's joint venture with Mitsubishi Electric next year could force it to shoulder further restructuring costs.
Hitachi's shares were down 3 percent on Tuesday, against a 1.2 percent fall on Tokyo's electrical machinery sub-index .IELEC.T.
(Editing by Michael Watson)