MUJF to acquire Hitachi Capital

December 2020 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

December 2020 Issue

Mitsubishi UFJ Lease & Finance has agreed to acquire its smaller rival Hitachi Capital in a deal worth around $2.8bn.

Under the terms of the deal, Mitsubishi UFJ will provide 571 million shares to shareholders of Hitachi Capital. The deal will help the new company compete with global competitors.

The companies intend for the business integration to become effective on 1 April 2020, upon the granting of approval at each of the extraordinary meetings of shareholders of the two companies planned to be held in late February 2021.

After merging, total assets of the new company would be ¥10 trillion, with combined revenue of around ¥1.4 trillion and net profit of over ¥100bn. The combined company would have around 10,000 employees.

As a result of the merger, the two companies will become a global player in the sector in terms of size and business lines by being able to complement each other’s business domains and strengthen their respective management bases, the companies said in a statement.

The new company will be divided into five business regions – Japan, Europe, the Americas, Greater China, which comprises China and Hong Kong, and Asia and Oceania. It will develop business modes based on regions by carefully assessing the unique characteristics and circumstances of each region, with an aim to exert a unique presence in each region, the companies said.

There has been a relationship between Mitsubishi UFJ and Hitachi Capital since 2016 when the two companies formed a capital alliance. The companies have also jointly incorporated the Japan Infrastructure Initiative Company Limited in order to reinforce the overseas infrastructure investment business. The companies have been negotiating a merger since then.

“As a result of such discussions we came to realise that the two companies are in an ideal mutually

complementary relationship with the two developing businesses worldwide in various

fields able to take advantage of their characteristics as a manufacturer-affiliated company

and a bank- and trading house-affiliated company,” said Takahiro Yanai, president and chief executive of Mitsubishi UFJ.

“We have reached the conclusion that through a merger, we will be able to provide new value that could not have been realised independently to our customers who are struggling with their various management issues as well as to our society,” he added. “We are confident that the business integration through merger is the best way of realising the management vision for both of us.”

“In order to achieve sustainable growth and enhance corporate value in such uncertain times, we consider it is absolutely essential, first of all, to strengthen our management base and, further, to make our scale even larger and more solid, and to create services and businesses that meet the needs of the new era by consolidating a variety of knowledge and information, as well as to proactively invest in R&D, M&As and other activities for such purposes,” said Seiji Kawabe, president and chief executive of Hitachi Capital.

“This business integration is the result of a series of deliberate discussions with Mitsubishi UFJ Lease & Finance Company Limited, whereby both companies reached an agreement on the recognition of the current situation and solutions for those business challenges,” he added.

The newly integrated company aims to create synergies from three aspects: optimising management resources, utilising sales networks and leveraging capital capabilities developed upon the business integration. The companies anticipate that synergies will create a value of around ¥10bn per year by fiscal year 2023.

Richard Summerfield