Joining the recent wave of restructuring in Japan’s electronics sector by coming to the rescue of a struggling domestic rival, the electronics giant Sharp is buying into Pioneer in a cross-shareholding equity tie-up.
The $41.1 billion yen ($357 million) investment in new shares, announced after the close of the market on Thursday, would make Sharp, riding high from four straight years of record profits, the largest shareholder in Pioneer with a more than 14% stake. In return, Pioneer would take a smaller 0.9% stake in Sharp, buying 10 million Sharp shares for 19.75 billion yen ($171 million).
Investors were not impressed. Sharp stock was down 2.14% at midday Friday to 1,917 yen ($16.7). Pioneer also dropped 3.35% to 1354 yen ($11.8) after making some initial gains early in the morning.
Sharp portrayed the deal as an attempt to fend off intense global competition and a way to allow it to sell more liquid crystal display (LCD), the flashy environmentally friendly flat screens in use in latest television models, through Pioneer, while Pioneer gets much-needed cash to help it revamp its business, as well as a chance to enter the LCD television market by selling TVs with Sharp LCD panels.
The Nikkei daily reported that Pioneer first approached Matsushita Electric Industrial, seeking a deal on plasma TV panel production, and was turned down before it turned to Sharp for a rescue.
The deal was seen by some critics as a throwback to the Japanese corporate cross-shareholding structure common after WWII, which serves to frustrate takeovers. A similar arrangement was recently struck between Kenwood Corp and Victor Co. of Japan. (See: “ Market Frowns On JVC-Kenwood Deal”)
Pioneer made a big bet on plasma display panels that turned out to be wrong, with lower-priced LCD TVs taking an increasing share of the market. It also makes car and home audio products. It has lost money for the last three years.
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