KKR to exit Japan's Pioneer DJ
KKR has agreed to sell its majority stake in AlphaTheta Corporation, a Japanese DJ equipment manufacturer previously known as Pioneer DJ, to domestic photo processing equipment producer Noritsu Koki for JPY35 billion ($324 million). The deal is worth JPY65 billion, including debt.
The private equity firm carved out the business from Pioneer Corporation for a valuation of approximately JPY59 billion in early 2015. KKR acquired all outstanding shares and then issued a 14.95% stake to Pioneer. The struggling electronics manufacturer was subsequently privatized last year by Baring Private Equity Asia, so the GP effectively controls the minority interest.
Noritsu said in a filing that the purchase of AlphaTheta was intended to help diversify its interests given the core photo processing equipment division – where it enjoys a 60% global market share – is seeing a retraction in demand. The company, which generated JPY63.9 billion in revenue during the 2019 financial year, has already entered other parts of the manufacturing space, as well as healthcare, senior care, and food and agriculture.
AlphaTheta produces equipment including DJ players, mixers, controllers, headphones, and speakers. It claims to be a market leader with a strong brand image, a reputation for technological differentiation, and high profitability. KKR claims to have helped establish the company as a standalone entity and expanded sales in emerging markets such as India and China.
“We are proud to have worked with the management team and employees of Pioneer DJ, now AlphaTheta, to assist the business’ growth in key global markets and to accelerate the company’s migration towards a software-subscription model to align with emerging industry trends,” said Hiro Hirano, KKR’s Japan CEO and co-head of Asia Pacific private equity.
AlphaTheta reported JPY25.3 billion in sales last year, up from JPY25.2 billion in 2018. Over the same period, net profit fell from JPY4.3 billion to JPY3.5 billion. The company posted a loss of JPY1.1 billion in 2017.
KKR made the investment from its second pan-Asian fund. The firm is currently in the market with Fund IV, seeking $12.5 billion. Last year, it secured another trade sale in Japan as Kokusai Electric – a semiconductor-focused thin-film manufacturing business – was picked up by US-listed Applied Materials for $2.2 billion in cash. Kokusai Electric was a Fund III portfolio company.
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