Baring Private Equity Asia to buy Japan's Pioneer for $900 million
The buyout firm is providing cash that is much needed by Pioneer, which had 50 billion yen ($443 million) of interest-bearing debt as of end-March and which will need further investment to be competitive.
Car navigation system makers are trying to keep up with a shift by carmakers into new technologies such as autonomous driving, connected cars and electric vehicles.
Pioneer will issue new shares worth 77 billion yen to Baring, and the private equity firm will later buy 25 billion yen of shares from existing shareholders, both groups said on Friday.
Pioneer, which posted a net loss of 7.1 billion yen in the year ended in March, flagged to investors in August that it was considering a major review of its car audio systems business and was in tie-up talks with several firms.
"I feel deep responsibility for what has happened, but an alliance with Baring is essential to restructure Pioneer," Pioneer Chief Executive Koichi Moriya told a news conference.
Jean Eric Salata, chief executive of Baring Private Equity Asia, said, "The market's very competitive and it's going to require a lot of investments and it's going to require changes in the ways the company makes decisions and implements strategy."
Pioneer will issue new shares to Baring at 50 yen a share while Baring will buy shares from the existing shareholders at 66 yen each, lower than Friday's close of 88 yen.
Pioneer's Moriya said the prices were appropriate considering that if Pioneer was not going to get a cash injection, the share price would fall further and the company could not go through the reform.
After selling its consumer electronics business in 2014, Pioneer focused mostly on car navigation systems, a technology rendered largely obsolete thanks to maps available on smartphones.
Development costs for advanced navigation systems have soared as companies including Panasonic Corp and Bosch [ROBG.UL] have poured money into next-generation cockpits for cars that make driving safer and luxurious, edging out cash-strapped companies like Pioneer.
Pioneer's deal follows Hitachi Ltd's sale of car navigation system maker Clarion to France's Faurecia in October.
(Reporting by Junko Fujita; Editing by Chris Gallagher, Sunil Nair, William Mallard and Adrian Croft)
By Junko Fujita