Magnetics Business & Technology - November/December 2021 - 26

INDUSTRY NEWS
Big Turnaround at Hitachi Metals as Bain Capital Readies for $7.5 Billion Acquisition
As Hitachi Metals plugs its flow of red ink with a 46% jump in
business, a consortium led by global private equity firm Bain
Capital is preparing to acquire it for about $7.5 billion. They are
looking at its capability to provide magnetic materials and components
in the growing electric vehicle market as an important
path to turnaround from lackluster performance in the past few
years.
The company's segment of Magnetic Materials & Applications
and Power Electronics was a strong contributor to the fresh
rebound, with revenues jumping 44% in the past three months
compared to the same period a year ago. Reporting July 28
for its most recent quarter which ended June 30, Hitachi Metals
said the segment posted revenues of about $289 million.
Company-wide, Hitachi Metals generated about $2 billion in
revenues for the quarter and posted a turnaround profit of about
$27 million.
Breaking down the revenues by business, sales of magnetic
materials increased year on year on the back of significant
growth in automobile sales in each region globally and strong
demand related to industrial and electronics markets, although
demands for rare earth magnets and ferrite magnets were affected
by the impact of production adjustments implemented by
automobile manufacturers
as a result of a supply shortage of semiconductors for automobiles.
Among
power electronics materials, soft magnetic materials,
and their applied products saw brisk demand for use in telecommunications
applications such as smartphones, tablets,
and server equipment. Demand for amorphous metals for
transformers also increased mainly in Asia. As a result, sales
of soft magnetic materials, and their applied products as a
whole increased year on year. Sales of ceramic components
increased year on year due to an increase in demand for use
in automobiles as well as for server equipment and continued
strength in demand for use in medical devices from the previous
fiscal year. As a result, sales of power electronics materials
as a whole increased year on year.
Meanwhile, no date has been set for closing yet, but the companies
appear to be moving along with the structure outlined in
late April when the proposed deal was announced. The consortium,
which includes two Japanese funds, will buy 53% of the
company owned by Hitachi and 47% owned by others, capping
26 Magnetics Business & Technology * November/December 2021
a string of divestitures by Hitachi as it reorganizes its business.
With a product portfolio that ranges from specialty alloys to
magnets, magnetic materials and electronic components, Hitachi
Metals has long been one of the world's leading players in
magnetic materials and high-end ferrite magnets with a strong
research and development tradition and deep ties with industry
customers. But the business has suffered lately, battered by
Covid-19 fallout and certainly not helped by disclosure last year
of a scandal involving the manipulation of quality inspection
data for magnets and other products for more than 10 years. It
trimmed its workforce 10% last fall, dropping employment by
about 3,200 positions.
Bain says that it hopes to support management in enhancing
Hitachi Metals' competitiveness, particularly in high-growth
sectors such as vehicle electrification and realize a strategy of
" Only 1 and No.1 " market leadership. Yuji Sugimoto, managing
director in Japan for Bain, said, " We will make full use of our
extensive management support systems and investment track
record, both in Japan and globally, to enhance Hitachi Metals'
future growth and improve corporate value. "
Revenues in its magnetic and power electronics segment fell
again in its most recent fiscal year ending March 31, dropping
9.1% to about $966 million. Breaking down the revenues by
business categories, demand for both rare earth magnets and
ferrite magnets among magnetic materials plummeted, hitting
a low in the first quarter, the company reported. However,
demand continued to recover for automotive electronic components
after the beginning of the second quarter ended September
30, 2020. Sales for the fourth quarter were up year on year
as demand picked up.
Among power electronics materials, sales of soft magnetic materials
and their applied products decreased year on year due
to a decline in demand for amorphous metals for transformers,
despite an increase in demand related to telecommunications
such as server equipment. Meanwhile, sales of ceramic components
remained year on year due to a decrease in demand for
use in telecommunications equipment, despite an increase in
demand for use in medical devices. As a result, sales of power
electronics materials as a whole decreased from the same
period in the previous year.
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