Kawasaki Heavy Ends Mitsui Merger Talks, Axes President

Kawasaki Heavy Industries Ltd said on Thursday it had ended merger talks with shipbuilding rival Mitsui Engineering & Shipbuilding Co Ltd and demoted its president, Satoshi Hasegawa [pictured above], who supported the discussions.

In a rare public dismissal in a country where boardroom tussles are often kept private, Kawasaki Heavy said in a news release that Hasegawa would be replaced by Vice President Shigeru Murayama.

He will return to being a director before stepping down at a June 26 annual shareholders meeting where Kawasaki Heavy's board will ask for endorsement of the management changes, the company said.

A merger between Kawasaki Heavy, best known outside Japan for its motorbikes, and Mitsui Engineering, a leading maker of ship engines, would have created a company with $20 billion in annual revenues, second in scale in the heavy machinery sector to Mitsubishi Heavy Industries Ltd.

Supporters of the merger argued that scale would help the two companies better compete for overseas machinery and infrastructure contracts.

Kawasaki, which is looking for opportunities beyond its nuclear reactor business, would have gained access to Mitsui Engineering's offshore gas and oil drilling platform technology, a bright spot in a global shipbuilding industry facing shrinking orders and overcapacity.

The proposal, however, faced internal opposition. Mergers among Japan's sprawling machinery makers have proved difficult in the past amid rivalries between conglomerates that stretch back to the country's emergence as an industrialised nation more than a century ago.

Reporting by Tim Kelly and Kentaro Sugiyama; editing by Jason Neely (C) Reuters 2013.