Mitsubishi Heavy Industries Ltd. and Hitachi Ltd. said Thursday they have agreed to merge their thermal power businesses to expand their product lineups and global sales reach.
MHI will take a 65 percent stake in the new venture, with Hitachi holding the rest, according to a statement issued by the two companies. Operations will commence in January 2014.
The combination will unite MHI's focus on large gas turbines with Hitachi's expertise in smaller models. The new business will compete with Germany's Siemens AG and General Electric Co. of the United States as economic growth in Asia spurs demand for electricity-generating equipment.
"It's very positive," said Masayuki Kubota, who oversees the equivalent of around ¥148 billion in assets at Tokyo-based Daiwa SB Investments Ltd. "The businesses have growth potential and merging with each other gives them a stronger competitive edge."
MHI's earned 36 percent of sales in the six months to September from its power systems unit. The figure for Hitachi came to less than 10 percent.
The two firms already have one venture in place that makes steelmaking equipment and another to sell trains overseas.