Polaris buys mapping business from Japan's Pioneer

The size of the transaction was not disclosed but Nikkei estimated the deal value at approximately JPY30 billion ($277 million). Polaris is investing via its fifth fund, which has a corpus of JPY150 billion, according to a filing. The firm has yet to announce a formal end to the fundraising, but CEO Yuji Kimura said last November that commitments were sufficient to hit the hard cap of JPY150 billion.

Pioneer has been PE-owned since 2019 when Baring Private Equity Asia instigated a JPY102 billion revitalization plan, comprising a cash injection and a privatization. Pioneer said the divestment of Increment P would take it “one step closer to transforming into a solution service company.” This involves integrating hardware manufacturing – its traditional strength – with services.

Increment P was established in 1994 to develop map data for Pioneer’s car navigation systems. It now has three business lines: developing navigation software used in systems manufactured by itself and by third parties; map services for consumers delivered through a searchable website and a smart phone app; and customized mapping services for enterprise users.

In Pioneer’s 2018 annual report – the most recent one available – car electronics accounted for JPY299.3 billion in sales out of a total of JPY365.4 billion. No segment breakdown is given, but mapping software, telematics services, and original equipment manufacturer (OEM) car audio products are routinely described in results filings as growth factors. Meanwhile, OEM car navigation systems and consumer market car audio products are a drag on performance.

Mobility solutions – such as autonomous driving – and related services are central to Pioneer’s development plan, so it will continue to collaborate with Increment P after the deal closes. The company is focusing on in-vehicle equipment for car manufacturers and advanced driving support systems that leverage big data, cloud computing, and artificial intelligence.

Increment P is expected to provide mapping data that is fed into Pioneer’s mobile human machine interface platforms alongside other information on driving conditions and the external environment.

“The amount of information inside the car has increased dramatically; and processing large amounts of information and performing complex operations while at the same time maintaining safety puts tremendous stress on drivers. In order to solve these issues, we will strengthen the development and provision of optimal solution services for the insurance, fleet and logistics industries by utilizing the vast amount of mobility data accumulated in the cloud since 2006,” Pioneer added.

Polaris’ fifth fund represents a substantial step up in size from its fourth, which closed at JPY75 billion in 2018. Speaking to Mergermarket, AVCJ’s sister title, Kimura noted that the firm is frequently asked why it has scaled up in fund size in recent years. Part of the reason is the unique position of domestic private equity GPs regarding corporate carve-outs.

“Japanese blue chips such as Fujitsu and Panasonic are not able to divest their larger non-core businesses to Japanese private equity firms due to fund size limitations, and then these businesses end up going to foreign private equity firms,” Kimura said. “Some of these Japanese corporates have expressed that they want a ‘Japanese solution,’ and this is where we can come in.”

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• Topics
• North Asia
• Technology
• Buyouts
• Industrials
• Japan
• Polaris Capital
• automobiles
• Transportation
• Baring Private Equity Asia