Hitachi Ltd <6501.T>
Bankers are in discussions with the Japanese company about an IPO, and underwriters could be named in early September, the sources said. Goldman Sachs
The hard-drive unit, Hitachi Global Storage Technologies (HGST), is the world's No. 3 hard drive maker.
Although an IPO is the most likely scenario, Hitachi is also considering a sale of all or part of HGST, several sources said.
Banks earlier this month gave presentations to HGST in San Jose, California, one source said. Another said bank teams had also traveled to Japan.
Last month, in an unusual move not tied to any event except the end of a financial quarter for HGST, Hitachi emailed analysts and fund managers an investor package highlighting the strengths of the unit.
Analysts said Hitachi may be looking to an IPO or sale to generate cash.
A sale might be a more attractive option, given the struggling U.S. IPO market and a sudden surge in tech-related M&A activity. Bankers have said more companies are now pursuing both options simultaneously.
An independent business structure is ideal for a business like this one where price volatility is so severe and there is the need for such big capital investment, said a Hitachi executive who declined to be named.
Hitachi said in a statement, We have not made any decision on the future (of HGST). Our stance from before -- that we have been exploring various possibilities for the direction of the business -- has not changed.
The company declined to comment further.
Hitachi last year moved to raise about $4.5 billion to shore up its battered capital base by issuing new shares and convertible bonds, its first public offering in 27 years.
The company, on track for its first annual net profit in five years, has boosted investment in infrastructure-related areas such as power and industrial systems.
Some analysts have said hard drive manufacturing may fall outside that mandate and that shedding the business could help the company's overall finances.
They are sort of cash-strapped, so this would get money to the firm, it would help them financially, said Hemant Hebbar, an analyst with Wedbush Securities.
Wedbush said in a research note on August 3 that Hitachi might be planning to spin out HGST through an IPO within the next two years.
(Reporting by Alex Dobuzinskis in Los Angeles and Emi Emoto in Tokyo; Additional reporting by Clare Baldwin and Ritsuko Ando in New York and Kentaro Hamada, Sachi Izumi and Taro Fuse in Tokyo; editing by John Wallace)