Japan's Polaris to buy Fujitsu mobile phone unit

The size of the deal was not disclosed, but Fujitsu said it would book a JPY30 billion ($276 million) gain as a result of the transaction. The Japanese conglomerate will transfer its mobile peripherals business to a new company – Japan EM Solutions – and combine Raku Raku Community SNS, a social network for seniors, with Fujitsu Connected Technologies. Polaris will assume control of both assets, with Fujitsu retaining a 19% interest in the former and a 30% interest in the latter.

The move comes as Fujitsu looks to focus on its core technology services business, which accounted for two-thirds of the company's JPY4.51 trillion in revenue for the 2017 financial year. Fujitsu was Japan's largest IT services provider by sales in 2016 and ranked sixth globally.

The ubiquitous solutions division – which is responsible for manufacturing mobile phones, tablets and PCs as well as mobilewear products such as car navigation systems – generated JPY1.03 billion in revenue. The contribution from PCs and mobile devices was JPY611.6 billion, down from JPY822.8 billion in 2013. By contrast, mobilewear sales have increased more than 50% over the same period.

Fujitsu said in a statement that the mobile devices business has become increasingly commoditized, with increased global competition. It said that transferring Fujitsu Connected Technologies to Polaris would enable the company to accelerate development of next-generation devices geared towards 5G and the internet of things (IoT). Fujitsu Connected Technologies is an original design manufacturing unit and Japan EM Solutions provides electronics manufacturing services.

"Polaris believes that these businesses hold the potential for further growth, given the strengths of such brands as the Raku Raku smartphone series, which enjoys overwhelming support from seniors, the perennially popular Arrows smart phone series, and also the highly advanced technological expertise that supports the development of such products," Fujitsu added.

Japanese corporates have shown a greater willingness in recent years to divest non-core assets, driven by a combination of governance reforms, an emphasis on return on equity, and the need to maintain competitiveness. This has contributed to a rise in private equity buyouts in both the mid-cap and large-cap segments. Past deals in the consumer electronics space include Sony selling its Vaio PC division to Japan Industrial Partners, and KKR carving out Pioneer Corporation's DJ equipment business.

Last November, Polaris agreed to acquire LB, a soft drink-focused division of beverage maker Asahi Group Holdings, for an undisclosed sum. The private equity firm is currently deploying its fourth fund, which closed last year at the hard cap of JPY75 billion – nearly twice the size of its predecessor vehicle.

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• Topics
• North Asia
• Buyouts
• Consumer
• Industrials
• Japan
• Polaris Capital
• manufacturing