Dropping both parents’ names: the SUMCO rebrand and TSE listing (2005)

Taking two companies’ names off the door

Read the 2005 steps as the branding flourish that completes a merger and you miss the point. What they led to was a channel for money that ran outside the pockets of the two parent companies. Sumitomo Metal Industries, prioritising the reduction of its own interest-bearing debt, had squeezed its capital spending to the ¥30bn-a-year range while topping up Mitsubishi Sumitomo Silicon with capital increases and loss coverage. On that footing there was no road past 380,000 wafers a month; the moment a public offering of $545.6M (¥60bn) repaid the borrowings, the source of investment capital had changed hands to the market.

And yet calling it independence does not survive a look at the shareholder register after listing. Sumitomo Metal Industries and Mitsubishi Materials each kept 29.95%; only 16% went to the market. What SUMCO gained was not freedom from control but the funding power to execute investment quickly. That power paid for the 2006 acquisition of Komatsu Electronic Metals and capital spending of ¥175bn — and it also set up an operating loss of $924.8M (¥87bn) in the year to January 2010. Capital that lets you move fast is capital that lets you be hurt fast.