Hitachi to Acquire GlobalLogic, a Leading U.S.-based Digital Engineering Services Company
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.
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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
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