LONG BEACH, CALIF. – Pioneer’s home entertainment and DJ businesses needed new investors to grow because parent Pioneer Corp. did not have the resources to build them up while simultaneously stepping up investment in its OEM and aftermarket car electronics business, the company’s statements show.
The sale of Pioneer Home Entertainment (PHE) and Pioneer DJ to Onkyo and KKR, respectively, represent a “series of moves to find partners to expand and develop our brand in the DJ and home A/V businesses … so we can expand our aftermarket and OEM car audio business,” said Russ Johnston, marketing and corporate communications executive VP of Pioneer Electronics USA.
PHE integration with Onkyo “could make us one of the most capable brands in home A/V,” he said, citing the combined entity’s buying power and production capabilities.
With Onkyo and KKR, Pioneer Corp. found “partners that believe in our brand and management and would continue to expand the businesses,” he said.
Pioneer Corp. posted net losses in fiscal 2012 and 2014. Car electronics accounted for 69 percent of the company’s fiscal 2014 sales of 451.8 billion yen. In the U.S., Pioneer had the No. 1 dollar share in 2013 in retail-level aftermarket sales and in 2014 through July, Pioneer said in citing NPD Group statistics.
With Pioneer Corp. concentrating on its car electronics business, “there will be more effort to synergize the two business [OEM and aftermarket],” Johnston added. A car-focused Pioneer Corp. is “positioned perfectly” to “bring connectivity features quickly to OEM,” he said.
Although Pioneer DJ will be sold with its staff intact to investment company KKR, PHE and Onkyo will be integrated, though details of the integration won’t be final until a final deal is signed in October.
With the integration, however, Pioneer Corp. has said it “will take the lead in streamlining the back-office functions of sales platforms outside Japan while Pioneer and PHE intend to leverage the manufacturing and purchasing functions of Onkyo under the leadership of Onkyo.” Pioneer also said “the parties agreed that the other functions should be gradually concentrated to maximize the potential merger synergies in the transaction.”
Pioneer didn’t disclose any more details about the disposition of its factories, but Johnston noted that Pioneer’s factories “produce products for a variety of our businesses across business lines.”
Johnston did say, however, that PHE and Onkyo product-development staffs will be integrated and that the integration of sales and marketing “will be studied.”
Pioneer isn’t saying what role Onkyo USA might play in marketing PHE products in the U.S. Onkyo USA is 51-percent owned by Gibson Brands, which is also the second largest shareholder in Onkyo Japan. After Gibson took a majority stake in Japan’s Teac, Onkyo USA began distributing two brands previously marketed by Teac America: the audiophile- oriented Esoteric electronics brand and Cabasse speakers.
A third party, Baring Private Equity Asia, was originally part of a three-way deal in which it would own a 51 percent stake in PHE with Onkyo and Pioneer owning the rest, but the three parties dropped the idea because, “after a few months of due diligence, it seemed to not be a fit for Baring,” Johnston said.