Hitachi reorganization leads to sale of controlling share of construction equipment business
By Murray PollokJanuary 16, 2022
Hitachi Construction Machinery is under new controlling ownership following Hitachi’s sale of 26% of its holding - valued at $1.6 billion - to Japanese trading company Itochu and private equity firm Japan International Partners.
A key motivation for the deal is Hitachi CM’s business in North America, where last year the joint venture with John Deere was ended and where the construction equipment business is undergoing a major reorganization.
Hitachi said the “serious challenges” presented by the reorganization led it to accept JIP and Itochu investment.
Hitachi’s stake is now 25.4%, with Itochu and JIP jointly owning a 26% controlling share.
Hitachi Construction Machinery is the world’s seventh largest construction equipment manufacturer, based on annual revenues.
JIP is a private equity firm experienced in finance and business restructuring, while trading company Itochu is already embedded in North America’s construction sector through its ownership of compact equipment specialist Multiquip. Itochu has also worked with Hitachi CM in the past, co-owning its business in Indonesia.
According to a statement from Hitachi, “through the new capital relationship with the partners [JIP and Itochu], the company will further solidify its business development in the North America markets, the world’s largest markets.
“At the same time, [Hitachi CM] will continue to collaborate with existing business partners around the world, including those in the South America market, to accelerate its global growth strategy.”
One element of the North American strategy will be a focus on equipment rental. Itochu already has shareholdings in the Japanese used equipment and online rental platform Sorabito and also Big Rentz, the online rental marketplace in North America. Itochu referenced these investments in its statement on the Hitachi deal.
“The construction machinery industry is seeing an accelerated flow from ‘ownership’ (purchasing) to ‘use’ (renting),” a release from Itochu stated. “This will require a business transformation to cater to diversified customer needs.”
Hitachi’s construction and mining equipment is manufactured in Japan.
Following the dissolution of the joint venture with Deere, Hitachi CM has been developing its sales and service network in the Americas. A new company Hitachi Construction Machinery Americas Inc. has 16 sales dealers covering the Americas, and existing distributors of wheel loaders will expand into other Hitachi products such as compact and construction-sized excavators, which will start in March.
Hitachi CM will continue to use the Hitachi brand and collaborate with the Hitachi group in R&D, including the development of IoT technology.
The OEM will also continue to work on the project for net zero emissions in the mining market, by providing full electric dump trucks, which are jointly under development with ABB Ltd.
Hitachi CM, headquartered in Tokyo, Japan, makes excavators, wheel loaders, road construction machines and mining machinery. It employs approximately 25,000 people worldwide and in the year to March 2021 reported revenues of $7.1 billion, of which 75% was outside Japan.
Hitachi Construction Machinery has already invested the in equipment rental market worldwide. It operates a rental business in Japan, and has the ‘Premium Rental’ business - run through its drealers - in Europe. In the U.S., it owns a share of ACME, a wholesale rental company that is now focused on Hitachi equipment.