<January 4, 2012> Only hours after the initial announcement this morning that Gibson Guitar Corporation and Onkyo Corporation will partner with mutual investments and the creation of a joint venture (JV) for product acquisition and marketing – new details of the deal are emerging. Also, the Japanese stock market has reacted to the deal driving up the value of Onkyo stock.
According to reports by the Nikkei in Japan, Onkyo will issue new shares of stock to Gibson through a third-party allocation. Onkyo will also invest in Gibson, ultimately acquiring a 1 percent stake in the company.
At the end of the day, the Nikkei says that Onkyo will net ¥824 million or just under $11 million from the deal. Onkyo plans to use the proceeds from the deal to fund new research and development initiatives, to facilitate production of new audio products, and to strengthen new sales promotions.
An interesting element of the deal was the announcement that Gibson also purchased a 51 percent controlling interest in Onkyo’s U.S. subsidiary, Onkyo USA. Ultimately, this may emerge as the headquarters for the JVs efforts to increase their mutual U.S. business.
Recently, Onkyo announced it was discontinuing its computer division. Not many in the United States were even aware of the fact that the company was selling computers in Japan. However, the severe market competition was causing Onkyo to lose money on the computer division.
The Japan stock market has reacted favorably to the new agreement. The combination of dropping the money-losing computer business and engaging in a strategic alliance to grow sales in the U.S. and in Asia has caused investors to drive up Onkyo’s stock 38% in midmorning trading.