TOKYO KKR & Co (KKR.N) is in talks to buy Japanese conglomerate Hitachi Ltd's (6501.T) power tools unit Hitachi Koki Co (6581.T), a person with direct knowledge of the matter said, in a deal that could be worth over $1.3 billion.
The sale to the U.S. investment fund would enable Hitachi, which owns 51.2 percent of Hitachi Koki's voting rights, to sharpen focus on its main business segments such as infrastructure. Hitachi has shed several non-core operations in recent years to bolster its profitability.
The final terms of the sale have not been decided yet, said the person, asking not to be identified because the person is not authorized to speak to the media.
The Nikkei business daily reported earlier on Wednesday that KKR is planning to buy the power tools unit for more than 150 billion yen ($1.3 billion).
How many shares in Hitachi Koki will be sold to KKR is still under discussion, said the person. Typically an investment fund like KKR would want to full control or at least a majority stake in a target company.
KKR plans to buy all of Hitachi Koki's outstanding shares through a tender offer, and the company will be delisted from the Tokyo Stock Exchange, the Nikkei said, without citing its sources.
The Japanese conglomerate said in a statement that it was considering various options to strengthen its business, including the sale of Hitachi Koki, but that nothing had been decided. It did not name any prospective buyers.
A KKR representative in Tokyo declined to comment.
The Nikkei business daily reported that negotiations between Hitachi and KKR were in the final stages and that an official agreement could be reached next month.
Hitachi Koki shares surged 15 percent on Wednesday morning amid a glut of buy orders which left them untraded. The surge boosted its market value to 177 billion yen.
Hitachi shares gained 1.2 percent.
(Reporting by Makiko Yamazaki, Junko Fujita and Chris Gallagher; Editing by Richard Pullin and Muralikumar Anantharaman)