Hitachi Ltd. said Wednesday it will fully acquire U.S. software engineering firm GlobalLogic Inc. for $9.6 billion (about ¥1 trillion) to boost its information technology business in overseas markets.
With the deal, the Japanese industrial conglomerate is aiming to globally accelerate digitalization in its railway, energy, health care and other businesses. It plans to complete the acquisition of the California-based firm by the end of July pending regulatory approval.
“We will speed up our IT business on a global basis and provide new values to our clients,” Hitachi CEO Toshiaki Higashihara said in an online news conference, adding the acquisition will bring synergy to the company’s domestic IT solution business.
GlobalLogic, founded in 2000, is offering system solutions to over 400 clients in various sectors including automakers and telecommunications and employs more than 20,000 people in 14 countries.
Its sales for 2021 are estimated at around $1.2 billion, according to Hitachi.
To finance the acquisition, Hitachi will spend ¥200 billion ($1.8 billion) in cash on hand. It will borrow from banks and issue bonds to raise the remainder of necessary funds.
Hitachi has been focusing on IT-related and infrastructure businesses, having bought an 80.1% stake in the power grid business of Swiss engineering group ABB Ltd. for around ¥740 billion last year, while selling its entire stake in chemical unit Hitachi Chemical Co. to Showa Denko K.K.
The firm has been helping customers automate and modernize manufacturing through its Lumada IoT platform, and technology and so-called smart life businesses now account for roughly 40% of revenues.
“The acquisition makes sense as the target operates in the IT area Hitachi is aiming to expand,” Bloomberg Intelligence senior analyst Takeshi Kitaura said. “The company has a client network, which will help Hitachi grow further.”
San Jose, California-based GlobalLogic has helped customers including Panasonic Corp., Adobe Inc. and Ericsson AB design and build software and other digital products, according to its website. It’s privately owned and funded by Canada’s CPP Investment Board and Partners Group.
Hitachi has been acquiring and disposing of assets over the past few years as part of consolidation efforts. It exited a $26 billion U.K. nuclear power project in September, and previously bought out its high-tech unit, while selling its diagnostic-imaging business. The firm is currently weighing bids for its Hitachi Metals Ltd. unit.
Hitachi has set up its business strategy to invest some ¥1 trillion to boost its IT-related business in its medium-term business plan through March 2022.
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