* Merger to create comprehensive materials producer
* Deal is part of Hitachi moves to cut costs
* Hitachi Cable jumps, Hitachi Metals tumbles
(Adds confirmation, share prices, background)
TOKYO, Nov 13 Hitachi Cable Ltd and
Hitachi Metals Ltd plan to merge in April as part of an
effort by their parent firm Hitachi Ltd to lift profit
margins by aggressively cutting costs at its subsidiaries.
News of the deal, which will combine materials businesses
ranging from automotive and electronics parts to fibre optics,
sent Hitachi Cable's shares surging 18.7 percent while Hitachi
Metals sank 8.2 percent, as the struggling cable maker gets
absorbed into the metals manufacturer.
The two Japanese firms aim to conclude the merger agreement
in early January, with the share allotment ratio for the deal
set to be announced at a later date, they said in a joint
statement on Tuesday.
Hitachi, which owns more than 50 percent of both companies,
has vowed to more than double its margins through cost-cutting
at its 900 subsidiaries and is moving its focus to the
high-profit global infrastructure business.
Hitachi Metals, which counts Nissan Motor Co and
Mitsubishi Electric Corp as major customers, posted
sales of 556.9 billion yen ($7.0 billion) for the year ended on
March 31, while Hitachi Cable logged sales of 432.5 billion yen.
Hitachi Cable, one of Japan's biggest cable makers and a
producer of electrical wires, semiconductors and electronics
materials, is struggling with sluggish domestic demand.
"While the two companies' individual product portfolios do
not seem to overlap much, they could benefit from a boost to
business development, especially in areas focused on overseas
markets where they do have customers in common, such as
automobile parts and infrastructure business," Bank of America
Merrill Lynch said in a research note.
Hitachi Metals controls roughly 40 percent of the global
market for high-performance magnets used in drive motors for
hybrid and electric vehicles.
Hitachi shares settled 0.5 percent higher against a 0.2
percent dip in Tokyo's benchmark Nikkei 225.
($1 = 79.4200 Japanese yen)
(Reporting by Mari Saito and James Topham in Tokyo, Pallavi Ail
in Bangalore; Editing by Edmund Klamann)