In a move that took the consumer electronics accessories business by surprise, Paris-based CE giant Thomson, known for its RCA brand, last Wednesday submitted a winning bid of $60 million for the CE business of bankrupt Recoton.
Staying well below the radar in the last few weeks before a bidding auction for Recoton was completed, Thomson topped front-runner Gemini Industries’ purchase proposal by $10 million.
First, Recoton’s board approved Thomson, following an auction of its assets, then the U.S. Bankruptcy Court for the Southern District of New York, here, last week stamped its approval on the deal. The transaction is expected to be completed after the customary closing process, said Thomson.
Gemini, on April 17, announced it had reached an agreement with Recoton to pay $50 million in cash for all of the assets of the bankrupt company’s CE accessories business. (See TWICE, May 5, p. 1.) Later, with Thomson’s higher offer in play, Gemini decided not to increase its bid, although it said it still intends to be aggressive in pursuing opportunities to grow its business.
The final purchase price was determined through an auction bidding process that was carried out under an order issued by the bankruptcy court. Recoton had filed a voluntary petition to reorganize under Chapter 11 on April 8, with the stipulation it had to auction off its business properties and all related assets.
Thomson, the French manufacturer known for its full line of video products, will tuck the newly purchased Recoton line under the wing of its new Consumer Solutions business, which last year was renamed, while announcing it was going to globalize its accessories activities.
With the addition of Recoton’s accessories business — including brand-name products Acoustic Research, Advent, Jensen, Discwasher, Ambico, Spikemaster and Recoton — Thomson said it would be able to enhance services to retailers and expand distribution worldwide. This growth initiative, which is expected to significantly enhance its revenue in 2003 and over the next few years, is consistent with Thomson’s global strategy to emphasize service to retailers and develop new business opportunities at higher margins.
The company said it has found positive synergy opportunities existing between the accessories business of Thomson and Recoton, in particular products, brands, distribution and supplier base. “The combination of Recoton assets with Thomson’s has obvious benefits, since we have complementary strengths,” said Michael D. O’Hara, Thomson’s executive VP/worldwide consumer products marketing and sales.
“We have carefully analyzed the potential benefit of adding Recoton’s accessories business and believe that the strengths of our own RCA brand and Thomson-branded business matched with Recoton’s distribution and brand names will mean an even stronger contribution of profitable growth for the Thomson business,” he said.
Citing it was only one day following the announcement Thomson had purchased Recoton’s CE business, O’Hara reported his team was already in Lake Mary, Fla., Recoton’s home base. We are “evaluating assets and deciding the proper integration” of the two companies, he told TWICE.
Asked about the fate of Recoton’s employees and the Lake Mary facility, O’Hara said Thomson “would need some level of effort” from them, but it was too early to have final plans in place. He said closing will take place in 30 to 60 days.
“Thomson will be able to offer comprehensive ‘turnkey’ services to retailers, such as customized logistics and in-store detailing for displays that hold hundreds of products. We are already well underway in an expansion of our accessories offerings throughout Europe, and the acquisition of Recoton’s substantial U.S. business will help us to globally achieve our objectives for sales and profit,” said O’Hara.
The purchase does not include Recoton’s Jensen, Acoustic Research and Advent audio products, which were purchased by Audiovox for $40 million. (See related story, p. 1.)
Amid rumors about which consumer electronics companies might step up to make a bid for all or part of Recoton’s CE business — none of which included Thomson — Gemini initially was the only player to answer the call.
A distinctly disappointed Michael O’Neal, president/CEO of Gemini, said his company dedicated a lot of time and effort to take advantage of Recoton’s CE business availability. “We made what we believe was a fair offer for the Recoton business, based on the value we saw for Gemini, and we decided not to increase our bid.
“It reached a point where the value was just not commensurate with the price to be paid,” said O’Neal about Thomson’s higher offer. “RCA wanted it badly, and they intended to bid until they got it. It didn’t make any sense to [keep up the] chase.
“Our commitment to expand our product lines, enlarge our customer base, extend our geographic reach and add new brands is as strong as ever,” continued O’Neal.
“One key aspect of our strategy is to use acquisitions to further enhance our ability to serve the needs of the large national and international retail chains that comprise the largest and fastest growing channel for distribution of consumer electronics accessories, ” he added.
Thomson, which already has significant product representation in the CE accessories category, some under the RCA brand, now will offer an accessories lineup that includes remote control units, surge protectors, wireless telephone jacks, headphones and speakers. Others are A/V cables, set-top and roof-top TV antennas, computer accessories, blank recording media and portable storage bags. The company also has a variety of product enhancement offerings for consumers with CD players, satellite receivers and digital TV displays.
Thomson expects to offer a full slate of Consumer Solutions accessories products and services to its retailer base, including delivery and restocking services needed in a business with thousands of individual products and customized “store-within-a-store” retail displays.
“This acquisition is another example of the consolidation taking place within our industry,” said David Geise, VP of Thomsons’ worldwide Consumer Solutions profit center. “It is driven by our customer’s preference for dealing with strategic partners who are capable of providing a comprehensive set of products and services — from product management and design, market analysis, branding and channel management, to technology licensing and sourcing, to supply chain management and after sales customer service.”
