KKR to buy majority stake in Japanese DJ equipment business

The private equity firm will acquire all outstanding shares in the Pioneer DJ business and then Pioneer will then subscribe to shares issued by the KKR acquisition vehicle. This will leave KKR with an 85.05% interest while Pioneer holds 14.95%.

It is KKR's first investment in Japan since it completed the acquisition of an 80% stake in Panasonic's healthcare business in April for JPY165 billion. That deal, which was agreed the previous October, also saw the seller retain a minority interest in the operation.

Pioneer's agreement with KKR comes days after Baring Private Equity Asia pulled out of a deal to acquire audio-video business Pioneer Home Electronics. The PE firm was poised to take a 51% stake with the remainder to be divided up between Pioneer and domestic rival Onkyo Corp. However, it was decided that it would be more efficient for Pioneer and Onkyo to negotiate integration without a financial sponsor.

Pioneer's DJ equipment business manufactures 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.

"Pioneer has built a leading global DJ equipment business based on its powerful brands and excellence in matching product development to market requirements. KKR will work together with Pioneer DJ's innovative management team and employees, and our investment partner Pioneer, to support further long-term growth of the business," Hirofumi Hirano, CEO of KKR Japan, said in a statement.

The DJ equipment business is part of Pioneer's home electronics division, which posted sales of JPY108 billion for the year ended March 2014, up 12.6% year-on-year. Although sales of optical disc drive-related products declined, overall sales rose due to a combination of currency depreciation and increased sales of DJ equipment and equipment of cable TV systems.

Overall sales at Pioneer came to JPY498.1 billion, up from JPY451.8 billion the previous year. However, the company has been struggled in certain parts of its business, posting a net loss of JPY19.5 billion in 2013 due to restructuring costs and poorly performing investments. The company returned to profit in 2014, but only just - net income came to JPY531 million.

Pioneer plans to concentrate on its car electronics business and work with outside partners to develop the audio-visual and DJ equipment businesses, hence the agreements with KKR and Onkyo.

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