Showa Denko to acquire Hitachi Chemical

In a large merger of two Japanese chemical makers with electronic material businesses, Showa Denko is buying Hitachi Chemical for about $8.9 billion. Hitachi had operating income of about $440 million on sales of $6.3 billion in its most recent fiscal year. About 40% of its sales come from materials, including chemical mechanical planarization slurries, epoxy compounds, and anode materials for lithium-ion batteries. The company also makes auto components, batteries, and printed circuit boards. Showa Denko had operating income of $1.7 billion on sales of $9.1 billion in 2018. The company makes petrochemicals and industrial gases in addition to electronic materials. It also has nonchemical businesses, including aluminum and building materials. Showa Denko says it wants to grow its high-tech businesses as a response to stiffening competition from China. Jefferies stock analyst Yoshihiro Azuma is negative on the deal. He is particularly worried about the amount of debt Showa Denko is taking on, and he doesn’t see significant synergies, as the two firms have little product overlap.