KYOTO, Japan - Nidec Corporation announced that one of its wholly owned subsidiaries, Nidec Sankyo Corporation ("Nidec Sankyo"), has agreed to purchase all of the shares of common stock of Mitsubishi Materials C.M.I. Corporation ("CMI") from Mitsubishi Materials Corporation ("Mitsubishi Materials"). Nidec Sankyo and Mitsubishi Materials have entered into a basic agreement in connection with the Transaction as of September 26, 2013.
As a member of the Nidec Group, Nidec Sankyo has been seeking opportunities to acquire businesses as part of its growth strategy, and has been endeavoring to grow and expand each of its major business lines with an M&A strategy tailored for each such business line. As part of these strategic efforts, in October 2012, Nidec Sankyo made an investment in SCD Co., Ltd., a South Korean manufacturer of motor drive units for home electric appliances, to make SCD a subsidiary with an aim to enhance its product portfolio, and has sought to strengthen its home appliance and residential and facility equipment businesses. The contemplated acquisition of CMI is intended to strengthen Nidec Sankyo's automotive product business and, if completed as planned, will be the second acquisition transaction entered into by Nidec Sankyo with an aim to enhance its product portfolio.
Nidec Sankyo has established its current position in the motor market primarily by offering stepping motors with a particular focus on small-diameter motors for optical disk drives, digital cameras, gaming consoles and other products. However, the markets for personal computers, digital cameras, gaming consoles and other products, which use mainly small-diameter stepping motors in which Nidec Sankyo has competitive strengths, have been maturing. Under these circumstances, Nidec Sankyo has made it a high priority to enhance and expand its product portfolio by entering into new markets for stepping motors. In particular, Nidec Sankyo has been considering entering into the automotive motor market, which is expected to grow significantly with expanding uses of such motors for electronically controlling fuel injection valves to improve fuel efficiency and enhancing the functionality of head-up displays.
CMI engages primarily in motor and electric contact product businesses, each of which has generated approximately one half of CMI's total sales in recent periods.
CMI's motor business primarily focuses on medium-diameter stepping motors particularly for the automotive and other products markets.
Since CMI's product lines do not have much overlap with Nidec Sankyo's product lines, the Transaction is expected to result in enhancement of Nidec Sankyo's product line-up. In addition, CMI's high reputation for its technology and reliability among customers in the growing automotive stepping motor market is expected to enable Nidec Sankyo, though CMI, to quickly enter into the market, which is known to require a substantial time to enter, and gain a stable customer base.
Furthermore, if Nidec Sankyo's cost competitiveness supported by its internal manufacturing capacity of more than 35 million units per month is successfully applied to CMI's medium-diameter motors, Nidec Sankyo's competitiveness may be further improved.
As discussed above, the efficient use of managerial and operational resources of Nidec Sankyo and CMI is expected to result in enhancement of the product portfolio, efficiency in product development and improvement in cost competitiveness for both companies. At the same time, CMI's products, which are currently sold mostly to Japanese customers, can be offered to new markets on a global basis through the Nidec Group's marketing channels.
With respect to CMI's electric contact product business, CMI is particularly strong in the market for on-vehicle relay products, which are necessary for switching on and off and reversing the rotational direction of automotive motors. The on-vehicle relay product market is expected to grow as the global automobile production and the number of motors used for each automobile increase. Moreover, CMI owns manufacturing facilities in China where global automotive relay manufacturers are concentrated. This geographical advantage is expected to contribute to the Nidec Group's efforts to expand its group-wide automotive motor business, which is a strategic growth business area of the Nidec Group, by entering into new markets and expanding its business operations in the Chinese automotive motor market.
Nidec Sankyo intends to continue to shift its operational focus to growth areas by seeking opportunities to acquire businesses and to endeavor to accelerate organic growth in an effort to further expand its business operations.