Hitachi buys US software firm GlobalLogic for $9.6b

by AFP

TOKYO – Japan’s Hitachi said Wednesday it will fully acquire US software company GlobalLogic in a deal worth $9.6 billion as it looks to expand its digital services offerings.

Hitachi will pay $8.5 billion for the firm, but the cost will be bumped up by the additional repayment of GlobalLogic’s outstanding debt, the Japanese company said.

The purchase comes with Hitachi increasingly focused on tech offerings, including through its Internet of Things unit Lumada.

“Through the acquisition, Hitachi expects the addition of GlobalLogic’s advanced digital engineering capabilities, and its solid client base including major technology companies, to strengthen the digital portfolio of Lumada,” Hitachi said in a press release.

“Digital transformation continues to be a priority for organisations everywhere, and the Covid-19 pandemic has only expanded demand for new data-driven business models, customer experiences, and connected ecosystems,” the company added.

“Against this backdrop, the demand for GlobalLogic’s services is growing rapidly, and the combined company has greater access to this massive market opportunity.”

With 20,000 employees in 14 countries, GlobalLogic brings a network of design studios and software product development centres as well as hundreds of clients.

The news, officially announced at the close of the trading day, was earlier reported by the Nikkei financial newspaper, and sent Hitachi stock plunging, ending the day down more than seven percent.

But Bloomberg Intelligence senior analyst Takeshi Kitaura said the acquisition “makes sense” given Hitachi’s ambitions in the sector.

“The company has a client network, which will help Hitachi grow further,” he told Bloomberg News.

The Nikkei report said Hitachi’s purchase was likely to be a record acquisition for a Japanese electrical equipment firm.

It comes after the firm’s mammoth buyout, completed last year, of Swiss-Swedish engineering giant ABB for 704 billion yen ($6.4 billion).