Losing to GE Doesn’t Curb Mitsubishi Heavy Takeover Plan

By Masumi Suga and Kiyotaka Matsuda

Mitsubishi Heavy Industries Ltd. (7011), thwarted in a bid for Alstom SA (ALO)’s power business in June, is seeking other takeover opportunities as it targets 5 trillion yen ($49 billion) in revenue by 2017.
The company, which gets half its sales in Japan from industries including power plants, shipbuilding, defence and aerospace, earlier this month repeated a sales forecast of 4 trillion yen in the year ending March 31, 2015, up 19 percent.
Mitsubishi Heavy’s energy and transport units will lead an expansion in the Americas and Southeast Asia, Chief Executive Officer Shunichi Miyanaga said in an interview. He outlined his plans for the next three years after a bid with German and Japanese partners for Alstom failed to derail General Electric Co.’s $17 billion acquisition of the French company’s assets.
“We intend to continue M&A,” said Miyanaga, speaking at Mitsubishi’s headquarters in Tokyo. “I think M&A isn’t always good, but considering our businesses and
the needs of globalization, there are several areas that would be best suited to M&A.”
The steel-making equipment business could be a candidate for acquisitions, said Miyanaga, without giving details. He said there are no immediate deals being considered in energy and aviation. Elsewhere, he wants to expand collaboration with France’s Areva SA (AREVA) in nuclear power equipment manufacturing. The company will boost capacity at aviation manufacturing units, such as in Hiroshima, rather than look outside, he said.

Photographer: Tetsuya Yamada/Bloomberg

Workers prepare a vessel for a toroidal field (TF) coil at Mitsubishi Heavy Industries... Read More

One of the three leading companies of the Mitsubishi Group, Mitsubishi Heavy traces its origins to 1884 when it began shipbuilding in Nagasaki. Its products include air-conditioners, aircraft parts for Boeing Co. and space launch vehicles.

Power Sales

Sales of power generating equipment including renewables accounted for 37 percent of its total in the financial year that ended in March.
Miyanaga said he expects substantial growth in the energy and environment unit over the next three years after forming a venture with Hitachi Ltd. (6501) earlier in 2014.
The two had held talks in 2011 over combining a number of units with Hitachi. Hitachi’s chief executive officer said in July he’s open to deeper ties. Miyanaga is not so sure.
“After we set up ventures in steel-making and thermal power operations, it’s not easy to find more,” he said in reference to working with Hitachi.
Mitsubishi’s bid with Siemens AG and Hitachi for Alstom’s energy business ended in June when the French government backed GE’s offer.

Photographer: Akio Kon/Bloomberg

Shunichi Miyanaga, president and chief executive officer of Mitsubishi Heavy Industries Ltd.

Miyanaga said Mitsubishi’s participation in the Alstom bid came together quickly and he’s prepared to be bold again if the need is urgent. Mitsubishi started to look at the opportunity in late April and by early June it had a concrete idea of how to proceed with Siemens, he said.

No Threat

“Usually we need some more time to prepare and decide what to do, but since this energy business was our major business” we had to act quickly, he said.
Still, he doesn’t see GE’s purchase as an immediate threat as Alstom hasn’t typically competed with Siemens, Mitsubishi and GE in large-scale gas turbines. While GE beds down its purchase over 12 to 18 months he hopes to see Mitsubishi Hitachi Power Systems “rising smoothly.”
In terms of immediate expansion, Miyanaga said he expects additional work from Boeing as it produces more Dreamliner 787s and the new 777 series.
Having recently won a contract for a Sao Paulo subway project, he’s looking for similar orders for urban transport systems. In Southeast Asia, he expects to sell more turbochargers to car manufacturers.
Beyond that, “the next target is the Middle East and Africa,” he said. “We expect demand in Europe won’t come back easily.”