TOKYO (July 25, 12:50 p.m. ET) — Sekisui Chemical Co. Ltd. plans to buy the Japanese PVC pipe manufacturing business of Mitsubishi Plastics Inc., including a joint venture in China, to create what would be the largest plastic pipe maker in Japan and try to boost its profits in a slower market there.
The companies did not disclose the sale price, but the purchase will combine Sekisui, currently the country’s second-largest pipe maker, with Mitsubishi, the third largest, the companies said.
A Sekisui spokesman said a key driver is to become larger and make gains in efficiency to overcome difficult conditions in the Japanese construction market.
Sekisui will take control of several Mitsubishi injection, extrusion and blow molding factories and associated units in Japan, along with the joint venture Wuxi SSS-Diamond Plastics Co. Ltd. business in Wuxi, Jiangsu province, which makes joints for pipes.
Mostly the sale includes PVC pipe production but it includes some polyethylene-related operations.
The deal, which was announced July 10, does not include Mitsubishi Plastics’ technology in cross-linked polyethylene pipe.
Tokyo-based Sekisui said the acquisition would lower costs in raw material procurement, production and logistics, allow it to better use recycling technologies from Mitsubishi and to expand globally, although the spokesman said there are no immediate expansion plans.
Sekisui currently has six plastic pipe factories in Japan.
Mitsubishi, in a statement, said difficult conditions in the Japanese pipe market prompted it to sell.
“In the recent pipe-related market of Japan… adverse conditions have persisted due to the decreasing number of housing under construction and shrinking public investment projects,” Mitsubishi said.
“Under such business conditions, we have sought independent rehabilitation of the business, but in consideration of future tough business conditions… it is the best means for a stable supply to the market and future development of the piping business that Sekisui Chemical will succeed the business as the leading manufacturer of piping,” Mitsubishi said.
The acquisition needs approval from the Japan Fair Trade Commission. The Commission in 2009 proposed a fine of 11.686 billion yen ($120 million) to both companies for violating Japan’s anti-monopoly laws for price fixing on PVC pipes and resin.
The companies have appealed the JFTC decision and the case is ongoing. That government proceeding has no bearing on Sekisui’s purchase, both companies said.
The sale to Sekisui includes Mitsubishi subsidiaries Toyo Plastics Industries Corp., a Kofu City based injection, blow molding and extrusion company and Hanyu Plastics Industries Ltd., a Hanyu City extruder. Some equipment from Ryobi Techno Inc. in Nagahama will transfer, as will various other units related to piping, all employing about 300 people.
After the sale is complete, Mitsubishi said it will restructure its Environment and Life Material business unit to streamline decision-making. It said that could include “establishing an integrated manufacturing and sales system” for its remaining cross-linked PE piping business, its fiber-reinforced plastic tank unit and its civil engineering materials business with its Mitsubishi Plastics Marketing sales affiliate.