The ¥960bn purchase of Hitachi Chemical and the pivot to Resonac (2020)

Efficiency and the nameplate — what the bet on transformation left behind

At the core of this decision was the idea of converting wealth that a commodity product — graphite electrodes — had delivered only temporarily into an advanced-materials business less exposed to market swings. The company piled on borrowings beyond the cash the accidental bubble had handed it, and accepted an enormous short-term loss in order to take the whole of the distinguished Hitachi Chemical. It can be read as buying a position ten years out rather than efficiency or immediate profit. Whether the roughly ¥1tn price was too high depends on whether the goodwill it took on turns into an impairment, or whether the synergies of integration show up in the numbers — and the answer is not in yet.

The weight of the bet is concentrated in the discarding of a corporate name carried for eighty-four years. Down came the nameplate of a grand old diversified chemical company, and the firm rewrote itself, name and all, into one that would compete globally in semiconductor materials. Yet the acquisition in fact broadened the conglomerate’s span, and the swapping of the portfolio — the carve-out of petrochemicals among other moves — has gone on since. Whether this acquisition was the completion of a transformation, or merely the beginning of a restructuring still under way, rests on whether growth in semiconductor materials brings fruit worth the heavy debt and the name given up.