The FINANCIAL — Japanese high-tech giant Hitachi Ltd. Said on November 16 that it plans to raise as much as $4.6 billion selling stock and convertible bonds and about 1 billion shares of stock.
The stock fell the most in six months, Bloomberg wrote. Hitachi plans to sell 100 billion yen ($1.1 billion) of convertible bonds and raise the rest in a sale of new stock, the Tokyo-based company said. The shares may be sold at a discount of 3 percent to 5 percent, according to an e-mail sent to investors by Nomura Holdings Inc., one of the sale arrangers.
The maker of nuclear reactors and hard-disk drives is raising the money to pay off debt and invest in facilities, according to the same source.
The capital raising, the company's first in 27 years, follows similar moves by NEC Corp and Toshiba Corp, and sent Hitachi's shares down 8.5 percent in the biggest drop in six months on Monday even though markets expected the fund raising, Reuters reported. Some analysts said the company might be forced to tap markets again and that Hitachi had sought to seek money before it could form a realistic plan for recovery.
"This amount is the absolute limit that Hitachi can seek from markets, but this may not be enough even to cover restructuring costs at such a mammoth firm, let alone invest in growth," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management Co, according to the same source.
The Japanese electronics conglomerate said it will issue 1.09 billion new shares to the public. An additional offering of 60 million new shares is scheduled under an overallotment arrangement in case of exceptional demand, The Wall Street Journal wrote. The combined number of new shares accounts for 34% of Hitachi's current shares outstanding.
Hitachi, with over 900 group firms and sales of 10 trillion yen, is headed for its fourth straight annual loss, Reuters reported. The group is seeing a recovery in its hard drives business and strong sales of its metals, cables and construction machinery but this has not been enough to counter the impact of losses in its flat TVs and semiconductors businesses.
Hitachi earns the bulk of its sales from making nuclear reactors, bullet train systems, elevators and from IT services, according to the same source. It will use almost half the money it raises to pay back debt, including short-term debt to cover a $3 billion bid to make five of its units wholly owned. Hitachi, like many of its once high-flying peers, has lost market share in flat TVs and digital devices to rivals from South Korea and Taiwan.
In July, Hitachi offered to buy out five publicly traded subsidiaries and affiliates for 282.2 billion yen to help speed up business decisions and reduce overlapping costs, Bloomberg wrote. The company will acquire outstanding shares of Hitachi Maxell Ltd., Hitachi Software Engineering Co., Hitachi Information Systems Ltd., Hitachi Plant Technologies Ltd. and Hitachi Systems & Services Ltd., it said on July 28.
Hitachi aims to spend about 100 billion yen for facilities at its Power & Industrial Systems unit to boost production, it said today. It also plans to invest 90 billion yen for the Information and Telecommunication unit, it said, according to the same source. Hitachi’s capital ratio, which stood at 10.9 percent as of Sept. 30, may be boosted to about 14 percent after the sale, Masanao Sato, a Hitachi spokesman said by phone.
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