Hoya eyes up to $5 billion in acquisitions

By Nathan Layne

TOKYO (Reuters) - Japanese high-tech glass maker Hoya Corp (7741.T: Quote, Profile, Research, Stock Buzz) could spend up to $5 billion on acquisitions over the next few years, its chief executive said on Wednesday, as it looks to expand its medical equipment bus1ness.

Hiroshi Suzuki also told the Reuters Global Technology, Media and Telecoms Summit that it may need to cut some jobs as it finishes restructuring of Pentax, a digital camera and endoscope maker it acquired last year.

Hoya, which makes glass used in the production of semiconductors and liquid crystal displays, is eager to put its cash pile of about $1.5 billion to work on acquiring companies instead of letting it build up on its balance sheet.

"If (we) don't do anything for the next couple of years half of our balance sheet will become cash. That's not good. I guess we need to do sizeable acquisitions in the next couple of years," Suzuki said, adding it could use debt to spend up to $5 billion.

"Anywhere between $1 billion to $5 billion," he said.

Pentax vies with Fujifilm Holdings (4901.T: Quote, Profile, Research, Stock Buzz) for the No. 2 spot in the market for endoscopes, camera-equipped medical devices used to examine inside the body. Both trail Olympus Corp (7733.T: Quote, Profile, Research, Stock Buzz), which dominates with 70 percent market share.

Olympus strengthened its hand last year by clinching a roughly $2 billion deal to buy Gyrus, a British maker of tools that can move or treat tissue in a less invasive manner than traditional surgery.

Suzuki said Hoya was also looking to complement its endoscope business with an acquisition that would allow it to use the endoscope for diagnosis instead of just viewing an organ. He is also interested in businesses in the opthalmology field.

"I won't limit ourselves to the extension of the endoscope business only. More we are looking at the medical field from the eyes of optics," Suzuki said.

CONSOLIDATION, PENTAX

Last month Hoya posted its first annual fall in operating profit in six years, hurt by falling prices of photomasks used to etch circuitry onto LCD panels and weaker sales of glass used in the production of hard disk drives.

Suzuki said he expects a wave of consolidation to hit both the photomask and hard drive glass markets. Both have about 6 players, and that number needs to be whittled down, he said.

"Even three may actually be too many. The market will not stabilize until you have two, two-and-a half players," he said.

Hoya's top competitor in hard drive glass substrates is Konica Minolta Holdings Inc (4902.T: Quote, Profile, Research, Stock Buzz). Hoya also makes substrates with the magnetic layer applied, competing with Showa Denko (4004.T: Quote, Profile, Research, Stock Buzz) and hard drive makers that do that process in-house.

It estimates its controls about 30 percent of the global market for large LCD photomasks. Its main rivals are Kyoto-based SK-Electronics Co (6677.Q: Quote, Profile, Research, Stock Buzz) and South Korea's LG Micron  Continued...