Hitachi Plant, Hitachi Kiden, Hitachi Industries and Related Hitachi Divisions to Integrate

Hitachi, Ltd., Hitachi Plant Engineering & Construction Co., Ltd. Hitachi Kiden Kogyo, Ltd. and Hitachi Industries Co., Ltd. signed a Memorandum of Understanding agreeing to integrate Hitachi Plant, Hitachi Kiden, Hitachi Industries and part of Hitachi's Industrial Systems Group on April 1, 2006. This integration is intended to strengthen the Hitachi Group's social and industrial infrastructure systems business, which includes industrial machinery, high voltage air-conditioning (HVAC) systems, water treatment systems, industrial plants, cranes and environmental facilities and systems.

Specifically, on April 1, 2006, parts of the Public & Municipal Systems Division (machinery-related systems business) and Industrial Systems Division in Hitachi's Industrial Systems Group will be separated and transferred to Hitachi Plant. At the same time, Hitachi Kiden and Hitachi Industries will be merged into Hitachi Plant, which will continue to operate under a new name.

Plans call for Hitachi Plant to allocate 11,591,000 shares of its common stock to Hitachi upon the aforementioned corporate split. The merger ratio is planned to be 10.93 and 13.40 for Hitachi Plant, Hitachi Kiden and Hitachi Industries, respectively.

Under its current medium-term management plan (HITACHI Plan II), the Hitachi Group is engaged in efforts to set itself apart and bolster its ability to compete by leveraging the aggregate strengths of the group as a collection of strong businesses. The social and industrial infrastructure systems business is one of the Hitachi Group's core businesses. Up until now, several different entities have been responsible for each part of this business.

Hitachi has handled large pump systems for water and sewage plants, as well as home appliance recycling systems, chemical and pharmaceutical plants and chemical equipment, such as evaporators. Hitachi Plant has provided high voltage air-conditioning (HVAC) systems, clean rooms, water treatment systems, soil remediation systems, chemical and pharmaceutical plants, food plants, and design, manufacturing and construction of power generation facilities, among other activities. Hitachi Kiden's businesses include water treatment equipment, conveyance systems for LCDs, cranes and electrical systems, including control panel. For its part, Hitachi Industries provides large pumps, LCD manufacturing equipment screen printers for Surface Mount Technology, compressors, gears, environmental testing facilities and other products and systems.

However, to promote the social and industrial infrastructure systems business as a core Hitachi Group business, it is essential to draw on the group's collective strengths. This entails drawing on the management resources of the group and combining its comprehensive, manufacturing, engineering and work-site capabilities.

The new company will bring together the respective technologies and know-how of similar and related businesses that have been scattered among the four companies. This process will involve the restructuring of operations into five business divisions in the new company: the Social and Industrial Business Division, responsible for water treatment equipment and systems, large pumps, compressors, gears and other products and systems; the Mechatronics Business Division, which will handle products and systems such as conveyance systems for LCDs, LCD manufacturing equipment and screen printers for Surface Mount Technology; the Air-Conditioning Systems Business Division, which will be responsible for air-conditioning systems for buildings and industrial HVAC systems such as clean rooms; the Industrial Plant Business Division, whose responsibilities will include chemical and pharmaceutical plants, food plants, chemical equipment and cranes; and the Energy Business Division, which will be responsible for the construction of nuclear and thermal power generation facilities.

Engineering, design and production, construction and service departments will be established in each of these business divisions to create a framework that will allow each of them to give full play to their collective strengths. Furthermore, company-wide, cross-organizational sales, R&D, manufacturing and other organizations will be established to increase synergies from integration.

Source: Hitachi, Ltd.