Mitsubishi Heavy Industries, Ltd. (TSE: 7011) and Hitachi, Ltd. (TSE: 6501) have reached a basic agreement on integrating businesses in fields centered on thermal power generation systems and jointly managing these operations.
The two Japanese companies plan to integrate this business by consolidating their respective thermal power systems operations within a joint venture company by Jan. 1, 2014. MHI and Hitachi will take equity interests of 65 percent and 35 percent, respectively.
The companies attribute the joint venture to the growing markets in China and other emerging countries. Competition from other big producers of gas turbines, such as Siemens and GE, may have also attributed to the planned merger.
In the thermal power generation field, MHI and Hitachi both have expansive product lineups. In gas turbines, MHI has focused on highly efficient large models in recent years. Hitachi sees its mainstay products as small and medium-sized models. Regionally, MHI has strengths mainly in Southeast Asia and the Middle East, while Hitachi has harnessed its strengths in markets such as Europe and Africa. The companies say they will strive to leverage the complementary strengths of both companies.
Through this agreement, MHI and Hitachi say they plan to develop a stable and efficient management base for the new company, while accelerating global business expansion by pursuing synergies through business integration. Further details, including an outline of the new company, will be announced as soon as they are determined, according to MHI and Hitachi.