On April 5th, Hitachi and Mitsubishi Electric jointly announced the details of the transaction. In the announcement, Hitachi Industrial Equipment Systems and Mitsubishi Electric jointly announced that their distribution transformer business at their Nagoya factory will be transferred to the former and integrated.
It is reported that the assets and other projects related to Mitsubishi Electric's Nagoya factory and distribution transformer business (including development, design, manufacturing, sales, and maintenance) will be transferred in stages to Hitachi Industrial Equipment Systems starting from October 2024, and are expected to be completed on April 1, 2026. The transaction must be approved by relevant departments before proceeding. Mitsubishi Electric has over 70 years of production experience and strong technical accumulation in the distribution transformer business at its Nagoya factory. Recently, in pursuit of energy-saving performance, this business has been promoting rich Top Runner oil filled transformers such as the R series.
However, the business transfer does not include Mitsubishi Electric's transmission and distribution system center, as well as transformers produced by Ako's factory. Mitsubishi Electric will continue to prioritize investing in business sectors with high growth prospects, such as the FA systems business.
The function of a distribution transformer is to reduce the voltage of the high-voltage electricity generated by the power plant, so that it can meet the electricity needs of users. They are installed at relay points in the power grid, such as substations, public facilities, commercial facilities, and commercial facilities. With the popularization of renewable energy, global power generation sources are becoming increasingly diversified, and the industry's demand for distribution transformers continues to grow.
According to a report by FUJI KEIZAI, a market research firm in Japan, it is expected that in the fiscal year ending March 31, 2027, distribution transformers used in factories and buildings will increase their actual value by 11.4% compared to the same period in 2020, in accordance with the goal of improving energy consumption efficiency set by Japanese regulations. It is expected that the market size will expand by more than 10% in 2026 compared to 2022.
Therefore, in view of the above market demand, Hitachi hopes to expand its product lineup of efficient, energy-saving, and environmentally friendly transformers and accelerate the growth of grid edge solutions centered on distribution systems by taking over Mitsubishi Electric's related business in Japan.
A few years ago, the company encountered difficulties in its operations, and Hitachi was forced to sell or divest a large number of business assets. In 2022, it established digital transformation (DX) solutions as the core of its long-term strategy, and in the process of implementation and implementation, it will fully utilize the company's decades of expertise in IT (Information Technology) Accumulated capabilities in OT (Operational Technology) and product aspects.
ABB's power grid business has been incorporated into the layout
In December 2018, Hitachi Group announced that Hitachi Limited (Tokyo Stock Exchange code: 6501, "Hitachi") had decided to acquire ABB Limited (New York Stock Exchange code: ABB, "ABB")'s globally leading grid business and had signed an agreement with ABB. In the initial stage, Hitachi acquired 80.1% of the shares in the power grid business, making ABB Power Grid a merged subsidiary. Hitachi has signed a purchase option to acquire the remaining 19.9% stake in the power grid.
Afterwards, the transaction continued to advance.
On July 1, 2020, Hitachi Limited and ABB Limited jointly announced the establishment of Hitachi ABB Power Grid Co., Ltd. The joint venture aims to create a new leader in the global power industry and expand business opportunities in various fields such as transportation, smart cities, and industry.
Starting from October 2021, the one-year anniversary of the establishment of the joint venture company, Hitachi ABB Power Grid officially changed its name to Hitachi Energy. At that time, Hitachi held 80.1% of the shares in the joint venture, with the remaining shares held by ABB. On October 13th of the same year, the name and brand of the joint venture were changed. In December 2022, ABB announced that it has completed the sale of the remaining 19.9% stake in its power grid business to Hitachi. At this point, Hitachi Energy has become a wholly-owned subsidiary of Hitachi.
The original ABB power grid business has undergone a complete transformation. It should be noted that the original ABB power grid invented commercial high-voltage direct current transmission technology 70 years ago, which reduces the energy loss of long-distance power transmission.
ABB was originally a leading enterprise in the field of power system business such as power transmission and distribution. After Hitachi was included in ABB's power grid business, its actual strength increased significantly, ranking second only to GE in terms of revenue scale. According to data, Hitachi Energy is headquartered in Switzerland and operates in over 140 countries/regions worldwide, with approximately 40000 employees in 90 countries/regions and a business volume exceeding $10 billion.
Mitsubishi Electric's Enhanced HVAC Business
In addition to the distribution transformer business sold to Hitachi mentioned above, Mitsubishi Electric is also increasing its layout in other fields, such as its subsidiary acquiring French air conditioning company AIRCALO.
On April 3rd, Mitsubishi Electric (TOKYO: 6503) announced that its wholly-owned subsidiaries Mitsubishi Electric Hydranics&IT Cooling Systems S.p.A. and Mitsubishi Electric Europe B.V. had fully acquired AIRCALO. The company stated that the expansion and upgrading of diversified demand in the European market, including customized products and environmental awareness, will bring strong demand to the HVAC system business.
According to the plan, Mitsubishi Electric will prioritize the development of its air conditioning and refrigeration system business in its mid-term business plan up to March 2026, and then expand its air conditioning and refrigeration business globally. Among them, the European region is regarded as the core market of Mitsubishi Electric's growth strategy, and directly acquiring local related manufacturers and their channels is the quickest and most effective way to implement the layout.
However, Johnson Controls has gone the other way - seeking to sell its HVAC business, with potential buyers including Samsung Electronics and Bosch.
According to reports, Johnson Controls is considering selling its HVAC business, including York International, as it focuses on becoming a global leader in the field of smart buildings ADT Corporation and its shares in the joint venture Hitachi have an asset valuation of approximately $5 billion.
In addition, HVAC giant Carrier Global is also undergoing business adjustments.
At the end of last year, Carrier announced that it would sell its Global Access Solutions business to Honeywell for $4.95 billion in cash. This is the biggest action taken by Honeywell, an aviation and automation industry giant, to enhance its building automation business capabilities after announcing a restructuring of its business group in October 2023.