KKR buys Hitachi Transport for $5bn
The US private equity firm Kohlberg Kravis Roberts (KKR), has bid to take effective control of Hitachi Transport System, one of Japan’s largest logistics providers.
In a statement issued on 28th April, KKR said that it would acquire 90% of the voting shares of Hitachi Transport System, with the wider Hitachi Group retaining 10% of the voting shares. The deal values Hitachi Transport System at US$5bn, with KKR offering Y8,913 per share for the stock traded on the Tokyo stock exchange. The price KKR is paying Hitachi for its shares is slightly less.
One of the major reasons for the sale is the wider Hitachi Group’s need to improve return on investment. Hitachi Limited is huge, covering the manufacturing of trains, automotive components, nuclear power stations and construction vehicles. This has made the company too unwieldy and unprofitable. Consequently, Hitachi is divesting many of its subsidiaries, with Hitachi Transport System being one of them.
Hitachi Transport System is not unprofitable. In the financial year 2021, the company saw revenues up 14% at Y743,612m (US$5.7bn) but net income fell 39% to Y14,622m (US$112m). Hitachi Transport Systems has a mix of different types of logistics businesses, with both freight forwarding and contract logistics. One notable contract logistics is Vantec which is a major logistics supplier to the automotive sector, especially to Nissan. The group generally has a substantial presence across ‘Asia-Pacific’ but it tends to serve Japanese industrial customers with activities in locations such as South East Asia. The management of Hitachi Transport systems perceives that this has to change.
To map out a new future the company has embarked on a new corporate strategy called ‘LOGISTEED 2030’ which seeks to redefine its businesses around technology and expand its activities outside Japan. In particular, the company is looking to expand in North America and Europe, probably through acquisition. It appears that one of the secondary purposes of the KKR acquisition is to gain access to the capital required to fund this investment and acquisition activity.