We first told you about Pioneer’s plans to sell off their struggling AV division just last month in a SYNCH Breaking News exclusive. Now word comes out of Japan as to the identity of the buyer for this business – a group that includes a private equity company and Onkyo.
See some very interesting details on this announcement…
Pioneer, according to a report by the Nikkei, wanted to sell off the AV division in order to improve the company’s overall profitability. Apparently, in looking at the AV division’s prospects, it found “dwindling demand” in AV’s future.
While a more comprehensive announcement is forthcoming, the initial report says that the division will be sold to Baring Private Equity, in partnership with Onkyo. Pioneer, the report says, will retain a minority stake in the company.
Baring will take controlling interest…
While the price being paid for the Pioneer division has not been announced, the report says that Baring PE will take a 51% controlling stake in the company. Onkyo and Pioneer will share the minority amount…but the exact breakdown wasn’t specified.
The fact that Pioneer’s AV division is being sold to a private equity company is not a huge surprise, as many PE companies – hungry for greater returns in a low interest environment – are hunting for bargains…especially bargains in consumer products. However, the participation of Onkyo, is a bit of a surprise as the two companies have typically resided in different positions in the market.
Good news for Pioneer fans?…
The announcement may be good news for Pioneer fans. Onkyo, a very respected manufacturer of audio products, brings technological know-how, competent manufacturing capabilities, and market savvy to Pioneer. However, with a minority stake…just how much influence Onkyo will have is unknown.
In fiscal 2013, Pioneer’s revenues in the AV division were approximately ¥108 billion ($1.06 billion). This is about a fifth of the company’s overall revenues. Interestingly, Pioneer’s AV division is about 3 times as large as Onkyo’s total 2013 revenues of ¥36.06 billion ($353 million).
Car navigation is where Pioneer wants to be…
Pioneer is jettisoning the division for the express purpose of focusing their efforts on their larger car navigation business which accounts for about 70% of the company’s revenues. Pioneer sees greater growth opportunities in this and related technologies.
In our first report, we noted that Pioneer was in negotiations to sell the division to Funai Electric. There was not comment on just where these discussion derailed. However, the report added the identity of a surprise third interested party – D&M Holdings, who apparently also failed to get the deal.
The Nikkei says that Pioneer plans to work with Onkyo in areas including “product design, component procurement, distribution and sales.” Apparently, the plan is – for now at least – to continue with the Pioneer brand name.