UPDATE 2-Hitachi shares head for biggest drop in 6 months
* Shares plunge 8.5 pct vs electrical index's 1.4 pct drop
* Hitachi says to make an announcement if any decision made
* Forced to seek funds before recovery realistic -analysts (Adds share price, market comment, background)
TOKYO, Nov 16 (Reuters) - Shares of Hitachi Ltd (6501.T), Japan's biggest electronics firm by revenue, were headed for their biggest single-day slide in six months after sources said it would raise up to $4.5 billion to shore up its battered capital base.
Two sources familiar with the matter told Reuters over the weekend that Hitachi plans to sell about 300 billion yen worth of shares and another 100 billion yen in convertible bonds. [ID:nT155750]
News of the public share offering, which would be Hitachi's first in 27 years, sent its shares down 8.5 percent, underperforming a 1.4 percent fall in Tokyo's electrical machinery index .IELEC.T.
Hitachi said in a statement that it would make an announcement if any decision were reached.
Hitachi, a sprawling conglomerate with more than 900 group firms, is joining a scrum of Japanese companies tapping equity markets before a possible slowdown in the economy.
But Hitachi has been forced to seek money before it could form a realistic plan for recovery, some analysts said.
"This amount is the absolute limit that Hitachi can seek from markets, but this may not be enough even to cover restructuring costs at such a mammoth firm, let alone invest in growth," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management Co.
"I don't think investors will want to put their money in. There are so many more deserving companies that need funds."
Hitachi, like many of its once high-flying peers, has lost market share in flat TVs and digital devices to rivals from South Korea and Taiwan, while it has been slow to adapt to innovations such as digital downloads and cloud computing.
Faced with its fourth straight year of losses, Hitachi's shareholders' equity ratio has slipped to just below 11 percent, roughly half that of rival NEC Corp (6701.T), which earlier this month announced it would raise up to $1.5 billion. [ID:nT212429]
The ratio is calculated by dividing shareholders' equity by total assets and is a measure of financial strength.
Issuing 300 billion yen worth of stock at Friday's closing price of 294 yen would boost Hitachi's shares outstanding by about 30 percent.
Hitachi's fund raising comes after Nippon Yusen (9101.T) last week said it would raise up to $1.6 billion, electronics conglomerate NEC Corp (6701.T) said it would raise $1.5 billion and Mitsui Chemicals (4183.T) said it would sell about $710 million in new shares.
Sources said Mitsubishi UFJ Financial Group (8306.T), Japan's largest bank, will issue about $11 billion in new shares to meet stricter capital requirements and boost lending in Asia.
With so many companies seeking funds and no new investments coming into Japan, share prices of healthier companies will be weakened by the capitalisation of these companies, some investors have said.
Hitachi, which has a joint venture with General Electric (GE.N) in nuclear power, has promised repeatedly to restructure unprofitable businesses while shifting resources to its power operations, which include nuclear power plants, railway systems, elevators and batteries for hybrid cars.
Hitachi launched a $3 billion bid earlier this year to make five listed units, including magnetic tape maker Hitachi Maxell (6810.T) and plant engineering firm Hitachi Plant Technologies Ltd (1970.T), wholly owned. [ID:nT98959]
But Hitachi remains weighed down by losses on its flat TVs and microchips. It must shoulder an investment of about 80 billion yen to pave the way for a merger of Renesas Technology -- its chip venture with Mitsubishi Electric (6503.T) -- and chipmaker NEC Electronics (6723.T) next year. [ID:nT284448]
Hitachi lost 787 billion yen in the past business year ended in March, a record for a Japanese manufacturer, and is forecasting a loss of 230 billion yen in the current year to March 2010. [ID:nT297614] ($1=89.64 Yen) (Reporting by Mayumi Negishi; Editing by Chris Gallagher and Joseph Radford)
