Mitsubishi Heavy Industries May Acquire Mitsui E&S' Shipbuilding Unit
Mitsubishi Heavy Industries is in talks to acquire Mitsui E&S' shipbuilding unit, MHI said in a statement this week. The goal is to reach agreement by the end of 2020 and to complete the acquisition in the fourth quarter of 2021, according to Reuters.
Mitsui and Mitsubishi sources told Nikkei last November that they were exploring the possibility of a shipbuilding merger in order to compete in a business that is rapidly consolidating. The motivation centers on naval shipbuilding, a core sector for the two firms.
“Mitsui E&S has strengths in shipbuilding and repair for the Ministry of Defense including supply vessels and observation ships,” said MHI in a statement.
The Mitsui E&S group has lost money for three years in a row, and its shipbuilding unit's sales fell by nearly 40 percent year-over-year in FY2020. It is currently in the midst of a restructuring program and has been selling off smaller units, including Mitsui E&S Plant Engineering, which was purchased by JFE Engineering in March.
Mitsubishi Heavy Industries and Mitsui E&S belong to competing keiretsu (quasi-conglomerate Japanese business groups). Mitsui E&S made a previous attempt at a tie-up in 2013 by negotiating with Kawasaki Heavy Industries, but the deal did not go through.
The shipbuilding industry faces lean times for the rest of 2020, according to Clarksons, with demand depressed due to the pandemic. While many small and midsize yards are feeling the pinch of shrinking orderbooks, the largest shipbuilders have been getting larger. Chinese state shipbuilding giants CSSC and CSIC recently merged to form the world's largest shipbuilding company; South Korean national champions Hyundai Heavy Industries and Daewoo Shipbuilding & Marine Engineering are moving slowly towards their own merger, though its completion has been held up by a delayed EU antitrust review.