PR88795

 

TOKYO, March 31, 2021 /PRNewswire=KYODO JBN/ --

 

  -- Acquisition will Accelerate the Digital Transformation of Social

     Infrastructure on a Global Scale by Aligning GlobalLogic's Advanced

     Digital Engineering Services with Hitachi's Lumada Portfolio

 

Hitachi, Ltd. (TSE: 6501, "Hitachi") today announced that it will acquire

GlobalLogic Inc. (President and CEO: Shashank Samant, "GlobalLogic"), a leading

U.S.-headquartered digital engineering services company. The acquisition is

based on the definitive agreement among Hitachi Global Digital Holdings

Corporation ("HGDH"), a U.S. subsidiary, an SPC established by HGDH for the

acquisition and GlobalLogic Worldwide Holdings, Inc., the parent company of

GlobalLogic. The transaction is subject to customary conditions and regulatory

approvals and expected to be completed by the end of July 2021.

 

Logo - https://mma.prnewswire.com/media/1157805/Hitachi_Vantara_Logo.jpg  

 

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."(*1)

Hitachi Vantara LLC, a U.S.-based subsidiary of Hitachi and its digital

infrastructure, data management, and digital solutions business, plays a key

role in driving Lumada business growth in the global market.

 

The acquisition will create synergies across Hitachi's five sectors - IT,

Energy, Industry, Mobility and Smart Life - and automotive systems business

(Hitachi Astemo) by accelerating the advanced digital transformation of social

infrastructure such as rail, energy, and healthcare at a global scale. Through

its Social Innovation Business delivered by collaborative creation with

customers, Hitachi aims to increase social, environmental, and economic value

for its customers and realize a sustainable society.

 

  *1 Lumada is the name of Hitachi's advanced digital solutions and services

     for turning data into insights that drive digital transformation of social

     infrastructure.

 

Headquartered in Silicon Valley, GlobalLogic is a leading company in the

fast-growing digital engineering services market. With over 20,000

professionals in 14 countries, GlobalLogic operates design studios and software

product engineering centers around the world.

 

GlobalLogic has deep "chip-to-cloud" advanced software product engineering

technology as well as experience design skills and vertical industry expertise.

By combining these capabilities, GlobalLogic helps clients drive new revenue

streams and incremental value for their customers by designing and developing

innovative software that powers products, platforms, and digital experiences.

The company has a solid client base with over 400 clients comprised of market

leaders and marquee brands spanning key industries such as communications,

financial services, automotive, healthcare & life sciences, technology, media

and entertainment, and manufacturing.

 

Digital transformation (DX) investment is growing at an accelerated pace

globally. IDC predicts that 65% of global GDP will be digitalized by 2022

driven by products and services from digitally transformed enterprises. (*2)

 

In addition, according to Zinnov (

https://c212.net/c/link/?t=0&l=en&o=3114737-1&h=4250202621&u=http%3A%2F%2Fwww.zinnov.com%2F&a=Zinnov

) (a research & advisory company specializing in Product Engineering and

Digital Transformation) the total addressable market for digital engineering

will grow to 1.1 trillion U.S. dollars by 2025, growing at a compound annual

growth rate (CAGR) of 19%.(*3)

 

  *2 Source: IDC Press Release, October 29, 2020: IDC Reveals 2021 Worldwide

     Digital Transformation Predictions; 65% of Global GDP Digitalized by 2022,

     Driving Over $6.8 Trillion of Direct DX Investments from 2020 to 2023

     https://www.idc.com/getdoc.jsp?containerId=prUS46967420

 

  *3 Source: Zinnov Zones for Engineering & R&D Services Research (slide 3

     https://zinnov.com/zinnov-zones-engineering-rd-services-2019/

     These figures do not include the COVID-19 effect.

 

Digital transformation continues to be a priority for organizations everywhere,

and the COVID-19 pandemic has only expanded demand for new data-driven business

models, customer experiences, and connected ecosystems. However, many

organizations lack the knowledge and experience to design and deploy new

digital platforms. They are also challenged by the shortage of the skills

required to build digital-native products, and to design new interaction models

and digital experiences, such as new digital ways of shopping or new models for

delivering and receiving healthcare. Against this backdrop, the demand for

GlobalLogic's services is growing rapidly, and the combined company has greater

access to this massive market opportunity.

 

Hitachi has been promoting initiatives to transform and provide more advanced

and intelligent social infrastructure, such as rail and energy, using its

digital technology, in order to achieve a transformation into a global leader

in the Social Innovation Business. As part of its 2021 Mid-term Management

Plan, Hitachi previously committed to the strategy to make growth investments

of 1 trillion yen in the IT sector(*4), primarily through Hitachi Vantara, to

strengthen digital capabilities including digital products, solutions,

partnerships, front and delivery capabilities. GlobalLogic will be an integral

part and a growth engine of Hitachi's portfolio of Lumada digital solutions and

services.

 

  *4 Hitachi, Ltd., IT Sector's presentation material at Hitachi IR Day 2019.

https://www.hitachi.com/New/cnews/month/2019/06/190604/20190604_01_it_presentation_en.pdf

 

 

Toshiaki Higashihara, President & CEO of Hitachi, said "The acquisition of

GlobalLogic creates an exciting new opportunity for Hitachi to expand our

offerings of Lumada solutions and services, provide value to customers in their

digital transformation journey, and grow our Lumada business globally. The

synergy of GlobalLogic's leading experience design and innovation with

Hitachi's expertise in IT, operational technology, and products, will help us

realize our goal to be the leading digital transformation innovator in social

infrastructure worldwide. Together, we will create new social, environmental

and economic value for our globally expanding client companies and elevate QoL

(quality of life) for people through contributions to realize sustainable

society."

 

"Companies in every industry are transforming with digital technology - to

better engage customers, create new revenue streams and drive a higher quality

of life." said Shashank Samant, President and CEO, GlobalLogic. "We have a

tremendous opportunity ahead and we are excited to embark on this journey with

Hitachi, combining our collective skills, technologies, and market presence to

deliver greater value to our clients as they transform their businesses."

 

GlobalLogic's revenues are expected to reach approx. 1.2 billion U.S. dollars

(approx. 129.6 billion yen(*5)) with adjusted EBITDA(*6) margins to be over 20%

in fiscal 2021. With a high profitability profile and strong revenue CAGR,

GlobalLogic will aim to achieve adjusted EBITDA of over 1 billion U.S. dollars

(approx. 108.0 billion yen) by fiscal 2028.

 

HGDH and GlobalLogic Worldwide Holdings have agreed on an equity value of 8.5

billion U.S. dollars (approx. 918.0 billion yen) with an enterprise value of

9.5 billion U.S. dollars (approx. 1,026.0 billion yen). This represents about

37.4x in CY2021 and 29.4x in CY2022 of expected adjusted EBITDA respectively

and are within the calculation range of Hitachi's comparable company analysis

and the discounted cash flow method. The total acquisition cost, including

repayment of GlobalLogic's interest-bearing debt, is expected to be 9.6 billion

U.S. dollars (approx. 1,036.8 billion yen).

 

  *5 Converted at the rate of 108 yen to the U.S. dollar.

  *6 EBITDA on a standalone basis, adjusted for stock-based compensation and

     non-recurring one-time costs.

 

Hitachi will acquire GlobalLogic Worldwide Holdings through a merger involving

MergeCo H Global Inc. ("SPC"), a subsidiary established by HGDH for the purpose

of the transaction. In this acquisition, the "reverse triangular merger method"

will be adopted. Specifically, SPC will be merged with and into GlobalLogic

Worldwide Holdings, which will be the surviving company. When the companies are

merged, HGDH or SPC will provide cash to the shareholders of GlobalLogic

Worldwide Holdings after which all the outstanding shares of GlobalLogic

Worldwide Holdings will be cancelled. All the shares of SPC held by HGDH will

be converted to common shares of GlobalLogic Worldwide Holdings, the surviving

company. In this way, HGDH will acquire 100% of the outstanding shares of

GlobalLogic Worldwide Holdings, the surviving company, and GlobalLogic

Worldwide Holdings and GlobalLogic will become wholly owned subsidiaries of

HGDH.

 

Closing of the transaction is anticipated by the end of July 2021 and is

subject to customary conditions and regulatory approvals.

 

Credit Suisse Securities (USA) LLC acted as financial advisor to Hitachi in

connection with the transaction and Shearman & Sterling LLP served as legal

advisor. Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC served as

financial advisors and Kirkland & Ellis LLP served as legal advisor to

GlobalLogic.

 

 

Subsidiary Profile: GlobalLogic Worldwide Holdings (Surviving Company)

 

Name                                        GlobalLogic Worldwide Holdings, Inc.

Head office                               San Jose, California, United States

Title and name

of representative                      President and CEO: Shashank Samant

Description of          

Business                                   Full-lifecycle product development services, user

                                                 experience design, product design, content engineering,

                                                 product research & ideation, sustaining engineering,

                                                 product engineering, product testing & quality

                                                 assurance, and product re-platforming

Establishment Date                 September 22, 2000

Capital                                     1,557,448 thousand U.S. dollars

Major equity interests  

and their interest      

ratios                                        Canada Pension Plan Investment Board: c.45%

                                                 Partners Group Holding AG: c.45%

                                                 Individuals (Executives of GlobalLogic Worldwide

                                                 Holdings and others): c.10%

Relationship between    

Hitachi and the company         Capital relationship          None

                                                 Personnel relationship      None

                                                 Transaction relationship   None

 

 

Financial Results of GlobalLogic Worldwide Holdings in the Past Two Years(*7)

(Million U.S. dollars)

 

Fiscal year-end                      March 2020        March 2019

Total assets                                   2,558.3               2,445.8

Revenue                                            771.1                 646.6

Adjusted EBITDA(*8)                        179.5                 145.6

Adjusted operating income(*8)           63.4                   31.1

  *7 Financial result ended in March 2018 is not included considering the

     impact of the acquisition of GlobalLogic Holdings Limited by GlobalLogic

     Worldwide Holdings in August 2018.

  *8 Adjusted for stock-based compensation and non-recurring one-time costs.

 

Company Profile: HGDH (Company to Acquire Shares)

 

Name                                     Hitachi Global Digital Holdings Corporation

Head office                            Santa Clara, California, United States

Title and name of              

representative                       Toshiaki Tokunaga

                                              CEO & Chairman of the Board

Business description            Holding company; conducts no operating

                                              activities and owns no significant assets other

                                              than through its interests in its subsidiaries

Establishment date               April 1, 2008

Capital                                  1,442,641 thousand U.S. dollars

Major shareholders and

their shareholding ratios      Hitachi, Ltd.: 100%

 

 

Schedule

 

Date of resolution at the

Board of Directors meeting           March 31, 2021

Signing of the agreement              March 31, 2021

Closing date of the transaction     By the end of July 2021 (planned)

 

 

Number of shares to be acquired, shareholdings before and after acquisition,

and acquisition price

 

Number of shares owned

before change                         0

Number of shares to

be acquired                            100

Stock acquisition cost            Approx. 8.5 billion U.S. dollars (Approx. 918.0

                                                billion yen)(*9)

                                                Additionally, advisory fee and other expenses are

                                                expected to be approx. 50 million U.S. dollars

                                               (estimated amount and approx. 5.4 billion yen)

Number of shares owned

after change                           100

Ratio of voting rights

held                                        100%

  *9 Converted at the rate of 108 yen to the U.S. dollar.

 

Impact on Hitachi's Financial Outlook

The impact of this transaction on the consolidated results for the fiscal year

ending March 31, 2022 will be announced as soon as it is determined.

 

[Reference] Consolidated financial forecasts for the fiscal year ending March

31, 2021 (announced on February 3, 2021) and consolidated financial results for

the previous fiscal year (million yen)

 

 

                                         Revenues     Adjusted operating    Income from continuing

                                                                    income(*10)             operations, before

                                                                                                         income taxes

        

        

Forecast for fiscal

2020 (year ending

March 31, 2021)                8,300,000             420,000                        671,000        

Consolidated financial

results for fiscal 2019

(year ended

March 31, 2020)                8,767,263             661,883                        180,268        

 

 

 

                                                                    Net income             Net income

                                                                                                  attributable to

                                                                                                   Hitachi, Ltd.

                                                                                                   stockholders

Forecast for fiscal

2020 (year ending

March 31, 2021)                                               370,000                 370,000

Consolidated financial

results for fiscal 2019

(year ended

March 31, 2020)                                               127,246                   87,596

 

  *10 Adjusted operating income is revenues less cost of sales as well as well

      as selling, general and administrative expenses.

 

 

 

 

Cautionary Statement

Certain statements found in this document may constitute "forward-looking

statements" as defined in the U.S. Private Securities Litigation Reform Act of

1995. Such "forward-looking statements" reflect management's current views with

respect to certain future events and financial performance and include any

statement that does not directly relate to any historical or current fact.

Words such as "anticipate," "believe," "expect," "estimate," "forecast,"

"intend," "plan," "project" and similar expressions which indicate future

events and trends may identify "forward-looking statements." Such statements

are based on currently available information and are subject to various risks

and uncertainties that could cause actual results to differ materially from

those projected or implied in the "forward-looking statements" and from

historical trends. Certain "forward-looking statements" are based upon current

assumptions of future events which may not prove to be accurate. Undue reliance

should not be placed on "forward-looking statements," as such statements speak

only as of the date of this report.

 

Factors that could cause actual results to differ materially from those

projected or implied in any "forward-looking statement" and from historical

trends include, but are not limited to:

  -- exacerbation of social and economic impacts of the spread of COVID-19;

  -- economic conditions, including consumer spending and plant and equipment

     investment in Hitachi's major markets, as well as levels of demand in the

     major industrial sectors Hitachi serves;

  -- exchange rate fluctuations of the yen against other currencies in which

     Hitachi makes significant sales or in which Hitachi's assets and

     liabilities are denominated;

  -- uncertainty as to Hitachi's ability to access, or access on favorable

     terms, liquidity or long-term financing;

  -- uncertainty as to general market price levels for equity securities,

     declines in which may require Hitachi to write down equity securities that

     it holds;

  -- fluctuations in the price of raw materials including, without limitation,

     petroleum and other materials, such as copper, steel, aluminum, synthetic

     resins, rare metals and rare-earth minerals, or shortages of materials,

     parts and components;

  -- estimates, fluctuations in cost and cancellation of long-term projects for

     which Hitachi uses the percentage-of-completion method to recognize

     revenue from sales;

  -- increased commoditization of and intensifying price competition for

     products;

  -- uncertainty as to Hitachi's ability to attract and retain skilled

     personnel;

  -- uncertainty as to Hitachi's ability to continue to develop and market

     products that incorporate new technologies on a timely and cost-effective

     basis and to achieve market acceptance for such products;

  -- fluctuations in demand of products, etc. and industry capacity;

  -- uncertainty as to Hitachi's ability to implement measures to reduce the

     potential negative impact of fluctuations in demand of products, etc.,

     exchange rates and/or price of raw materials or shortages of materials,

     parts and components;

  -- credit conditions of Hitachi's customers and suppliers;

  -- uncertainty as to Hitachi's ability to achieve the anticipated benefits of

     its strategy to strengthen its Social Innovation Business;

  -- uncertainty as to the success of acquisitions of other companies, joint

     ventures and strategic alliances and the possibility of incurring related

     expenses;

  -- uncertainty as to the success of restructuring efforts to improve

     management efficiency by divesting or otherwise exiting underperforming

     businesses and to strengthen competitiveness;

  -- general socioeconomic and political conditions and the regulatory and

     trade environment of countries where Hitachi conducts business,

     particularly Japan, Asia, the United States and Europe, including, without

     limitation, direct or indirect restrictions by other nations on imports

     and differences in commercial and business customs including, without

     limitation, contract terms and conditions and labor relations;

  -- the potential for significant losses on Hitachi's investments in equity

     method associates and joint ventures;

  -- uncertainty as to the success of cost structure overhaul;

  -- the possibility of disruption of Hitachi's operations by natural disasters

     such as earthquakes and tsunamis, the spread of infectious diseases, and

     geopolitical and social instability such as terrorism and conflict;

  -- uncertainty as to the outcome of litigation, regulatory investigations and

     other legal proceedings of which the Company, its subsidiaries or its

     equity-method associates, and joint ventures have become or may become

     parties;

  -- the possibility of incurring expenses resulting from any defects in

     products or services of Hitachi;

  -- uncertainty as to Hitachi's ability to maintain the integrity of its

     information systems, as well as Hitachi's ability to protect its

     confidential information or that of its customers;

  -- uncertainty as to Hitachi's access to, or ability to protect, certain

     intellectual property; and

  -- uncertainty as to the accuracy of key assumptions Hitachi uses to evaluate

     its employee benefit-related costs.

 

The factors listed above are not all-inclusive and are in addition to other

factors contained elsewhere in this report and in other materials published by

Hitachi.

 

About Hitachi, Ltd.

Hitachi, Ltd. (TSE: 6501), headquartered in Tokyo, Japan, is focused on its

Social Innovation Business that combines information technology (IT),

operational technology (OT) and products. The company's consolidated revenues

for fiscal year 2019 (ended March 31, 2020) totaled 8,767.2 billion yen ($80.4

billion), and it employed approximately 301,000 people worldwide. Hitachi

drives digital innovation across five sectors - Mobility, Smart Life, Industry,

Energy and IT - through Lumada, Hitachi's advanced digital solutions, services,

and technologies for turning data into insights to drive digital innovation.

Its purpose is to deliver solutions that increase social, environmental and

economic value for its customers. For more information on Hitachi, please visit

the company's website at https://www.hitachi.com.

 

SOURCE: Hitachi Ltd.    

 

CONTACT: Japan, Emi Takase, Public Relations Department, Corporate Brand and

Communications Division, Hitachi Ltd., Emi.takase.qk@hitachi.com, Phone:

+81.70.3514.1754; United States, David McCulloch, Corporate Marketing and

Communications, Hitachi Vantara, David.McCulloch@hitachivantara.com, Phone:

+1.925.487.2866