Business | Technology
Sharp to take 14% stake in Pioneer
Japanese electronics maker Sharp Corp will buy about $357 million worth of new shares from Pioneer Corp and work with its loss-making rival in developing DVD players, car electronics and displays.
- Reuters
- Published: 00:17 September 21, 2007
Tokyo: Japanese electronics maker Sharp Corp will buy about $357 million worth of new shares from Pioneer Corp and work with its loss-making rival in developing DVD players, car electronics and displays.
The deal is the latest move by Japan's electronics conglomerates to form alliances or ditch unpromising businesses to try and keep up with deep-pocketed global rivals and respond to increasing shareholder pressure for better returns.
Sharp is one of the world's top makers of liquid crystal display (LCD) TVs, competing with Sony Corp and Samsung Electronics Co while Pioneer is a producer of plasma display (PDP) televisions, audio equipment and car electronics.
Lacking in scale
While Sharp is one of the strong players in the fast-growing flat TV market, Pioneer has been losing money because it lacks the scale to make its products as efficiently as Matsushita Electric Industrial or LG Electronics Inc.
"This is more a matter of helping Pioneer than anything else. It doesn't seem as if it's positive for Sharp," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management. "What it basically means is that Pioneer can't go it alone."
Both companies tried to play down an image that Sharp was bailing out Pioneer, and they said they had no plan for an eventual merger of the two at this point.
"We have been looking for a good alliance partner in order to develop attractive products and increase corporate value under tough business conditions," Pioneer President Tamihiko Sudo told a joint news conference.
Eyes on synergy
Sharp president Mikio Katayama said the company expected a synergy in developing new products by combining Sharp's display technology and Pioneer's strength in audio and car electronics products.
Just how the alliance would affect power dynamics in the flat TV market remains unseen, since at this moment, specific joint efforts concerning the flat TV business was limited to Sharp's supplying its LCDs to Pioneer, which did not have LCD TVs in its lineup.
And Sharp's Katayama said the firm had no plan to add PDP TVs to its lineup.
In other areas, they said they will work together in development of next-generation DVD players, network-related products for the home, car electronics and imaging and display technology.
The two companies said they were also considering joint efforts in the development of organic EL (electroluminescence) displays.
Pioneer said it would issue 30 million shares to Sharp, raising 41.4 billion yen ($357.3 million) and making Sharp its top shareholder with a stake of 14.3 per cent. Sharp, in turn, will allot 10 million treasury shares to Pioneer for 19.7 billion yen.
Revival
The alliance also underscores the revival of the mutual holding of shares between Japanese companies to cement business relationships as well as to protect against takeovers, though the practice is often criticised as an inefficient use of capital.
Yasuo Yabe, director of sales at Meiwa Securities, said the news could spur buying of Japan's electronics sector, which is thought to be long overdue for a shake-out.
"This is not a merger or acquisition and is a typical alliance for Japanese companies ... but over the long term, the move should be good," Yabe said. "I think it is positive for electronics shares as well."
Prior to the announcement, shares in Sharp closed down 1.8 per cent at 1,959 yen while Pioneer's stock fell 0.1 per cent to 1,401 yen. The benchmark Nikkei average gained 0.2 per cent on the day.
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