Hitachi Sells $3.9 Billion in Stock, Convertible Bonds to Increase Capital
Dec. 7 (Bloomberg) -- Hitachi Ltd., Japan’s fourth-largestcompany by revenue, sold 350.7 billion yen ($3.9 billion) inshares and convertible bonds to help fund new businesses and payoff debt as it heads for a fourth straight annual loss.
The unprofitable maker of everything from vacuum cleanersto nuclear reactors sold 1.09 billion shares at 230 yen each, or3.4 percent less than today’s closing price, Tokyo-based Hitachisaid in a statement. Hitachi also sold 100 billion yen of bondsconvertible into stock.
The company joins NEC Corp. and Toshiba Corp. amongJapanese manufacturers selling stock this year to replenishcapital lost following the global recession. Hitachi may need tosell more shares, dispose of some businesses or post profits tomeet its goal of raising its shareholder’s equity to 20 percentof assets.
“They will need more money going forward,” HideyukiSuzuki, a Tokyo-based analyst at SBI Securities Co., said beforethe announcement. “The company has latent potential, but hasbeen plagued by management problems and an inability to realizethis potential since before the financial crisis.”
Hitachi fell 3.3 percent to close at 238 yen in Tokyotrading today, compared with a 1.5 percent gain in the benchmarkNikkei 225 Stock Average. The stock has fallen 19 percent sincelast month’s share-sale announcement on concern the offeringwill dilute the value of investors’ existing holdings.
Discounted Price
The company had planned to sell the stock at a discount of3 percent to 5 percent, according to an e-mail sent to investorsby one of the arrangers last month.
Hitachi is selling 400 million shares to Japanese investorsand 690 million shares to overseas buyers, it said, reiteratinga target announced on Nov. 16.
The five-year bonds will pay interest of 0.1 percent and beconvertible into common stock at 317 yen apiece, or 33 percenthigher than the last closing price, it said. Investors will beable to convert the bonds into stock from Jan. 4, it said.
Nomura Holdings Inc. and Goldman Sachs Group Inc. arearranging the sale.
Hitachi plans to use the proceeds to invest in growthbusinesses and repay debt, the company said last month. It’sforecasting a 230 billion yen net loss for the 12 months endingMarch 31 after a record 787.3 billion yen loss the previous year.
Hitachi Reorganization
Efforts to cut costs and procurement expenses, as well asreorganization of businesses such as digital media, helpedmitigate losses in the second quarter, Hitachi said last month.Stimulus measures around the world helped demand from China andemerging markets recover, the company said in the statement atthe time.
In July, Hitachi offered to buy out five publicly tradedsubsidiaries and affiliates for 282.2 billion yen to help speedup business decisions and reduce overlapping costs.
Hitachi aims to spend about 100 billion yen for facilitiesat its Power & Industrial Systems unit that makes power plants,construction and manufacturing machinery, it said last month. Italso plans to invest 90 billion yen for the Information &Telecommunication division that makes hard-disk drives,computers and telecommunications equipment and services, it said.
Japan Share Sales
Japanese companies including Toshiba and Nomura have raised3.9 trillion yen in stocks and equity-linked securities thisyear, more than double the 1.5 trillion yen raised in 2008, asequity markets recover from the bankruptcy of Lehman BrotherHoldings Inc. last year, according to data compiled by Bloomberg.
NEC, Japan’s largest maker of personal computers, lastmonth sold 117.6 billion yen by selling new shares to Japaneseand overseas investors.
The stock sale, Hitachi’s first in 27 years, wouldincrease the company’s outstanding shares by as much as 34.1percent, it said last month. The convertible bonds may alsoincrease the number of outstanding stock by 7.8 percent after aconversion, it said at the time.
The sale may bolster the book value of its common equity to14 percent of total assets, compared with 10.9 percent at theend of September, Hitachi said last month. The company aims toraise the ratio to 20 percent in a “few years,” Executive VicePresident Takashi Miyoshi said in July.
“Japanese companies put a lot of weight on capital ratiofigures because weaker numbers may undermine the trust offinancial institutions and investors,” Fumihito Gotoh, head ofJapan credit research for UBS AG in Tokyo, said. “The loss oftrustworthiness may make it difficult for a company to raisemoney.”
To contact the reporter on this story:Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net. Last Updated: December 7, 2009 03:47 ESTSource: Bloomberg
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