Adcom, Emerson Create Joint Venture - Twice

Adcom, Emerson Create Joint Venture

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High-end audio supplier Adcom will have the resources to expand distribution beyond custom installers to high-end retailers, and mass-market electronics supplier Emerson Radio will gain the technical expertise to offer higher-end products under a joint venture formed between the two companies.

The joint venture, called Advanced Sound and Image (ASI), puts Emerson's resources behind the Adcom brand, which Emerson North American operations president John Spielberger described as undercapitalized. ASI will operate out of Scottsdale, Ariz., but be headquartered in Emerson's Parsippany offices.

Under the terms of the deal, Emerson got a controlling interest in ASI, and in exchange, Emerson made a "nominal upfront cash investment" in ASI and made a secured line of credit available to the joint venture. Adcom's private owners got a non-controlling interest and a "nominal cash consideration" in return for providing ASI with assets, including an "exclusive worldwide royalty-free license to make, sell and distribute products incorporating Adcom's intellectual property, including its trademarks."

The terms were outlined in an agreement in principle announced in early January.

Spielberger emphasized that the Adcom brand will not enter the mass-merchant channels where Emerson is focused but that Adcom would be able to use its new resources and Emerson's relationships to enter "high-end retail," including consumer electronics specialists. For its part, Emerson will use Adcom's technical expertise to design step-up products to enter high-end retailers with the Emerson brand. "Emerson always offered quality and value and will continue to do so to its existing account base," Spielberger said, but whereas "Emerson has been perceived as an under-$100 brand — this will launch us into a brand that can compete above $100," he said.

Emerson's home audio products have traditionally been CD-based, but the join venture will thrust the brand into more "digitally oriented [compressed-music] products," including a planned iPod dock that up-scales iPod video to 1080p. The company hopes to launch it in 2008. Current products include iPod-docking speaker systems, clock radios and boomboxes along with traditional clock radios, CD shelf systems, headphone CD players and nostalgia products, but not headphone MP3 players.

The joint venture will also give Adcom access to additional manufacturing facilities, Spielberger said.

The deal follows the installation of a new executive team at Emerson. Spielberger joined Oct. 29 as did the current COO. A new controller started earlier in 2007, and a new chief financial officer started about a year ago. The intent was to "relaunch the Emerson brand," Spielberger said.

The Adcom brand, founded in the 1970s as a high-end high-value line, was owned by current Adcom managing director Dan Donnelly and other investors prior to the joint-venture deal. Before Donnelly and the other investors took charge, the brand was owned by Klein Technology Group, which purchased it in early 2002 from its 1970s founders. Donnelly was among the group's owners. Adcom's founders currently market the KEF America brand.

Adcom presently offers audio components, a DVD player and surge suppressor/line conditioners, according to its Web site.

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