Japanese electronics company Pioneer said on Friday that it will become a wholly owned subsidiary of Hong Kong's private equity firm Baring Private Equity Asia (BPEA), in a 102 billion yen ($904 million) commitment.
Baring is to spend a total of 102 billion yen ($904 million) on the acquisition, once Pioneer officially decides to go ahead at a special general shareholders meeting set for Jan. 25. The Pioneer Revitalization Plan comprises 77 billion yen of investment by BPEA in Pioneer and a cash offer to existing Pioneer shareholders of about 25 billion yen.
In the first quarter of this fiscal year, Pioneer experienced challenging financial results with cashflow declines. The company's earnings report included a note acknowledging uncertainties about our going concern assumptions. As a result, the Japanese company began exploring a range of measures for companywide management reforms.
"After deep discussions between both parties, we concluded that it would be best to take Pioneer private. This is because we recognized that to ensure business continuity and return Pioneer to growth in the medium- and long-term, it is vital to swiftly overhaul our organizational structure and review our business portfolio," said Koichi Moriya, Pioneer President and CEO. "We also recognized that, given the challenge of achieving near-term profitability, taking the company private represents the best option for Pioneer," he added.
Consequently, subject to shareholder approval at an extraordinary shareholders' meeting on January 25and the completion of required filings, BPEA will invest in Pioneer and take Pioneer private, making us a 100%-owned subsidiary of BPEA.
Moriya said that once the investment is in place, there will be changes to the management team. All of Pioneer's current board members, excluding President Koichi Moriya and two outside directors, are to resign and be replaced by officials dispatched from Baring.
Pioneer plans to cut its workforce by about 15%. The company had about 17,000 employees on a consolidated basis as of the end of March 2018.
Pioneer is currently selling car navigation systems and other in-car electronics.
For the full year through next March, the company expects to log an operating loss of 5 billion yen, primarily due to a 5.5 billion yen loss in the mainstay car electronics business.