3 Min Read
* 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 (Reuters) - 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)