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Pioneer to slide under Hong Kong fund's umbrella and delist

Japanese company to cut workforce 15% as auto sector pressures take toll

Pioneer President Koichi Moriya, left, and Baring Private Equity Asia CEO Jean Eric Salata speak to reporters in Tokyo. (Photo by Karina Noka)

TOKYO -- Ailing car navigation system maker Pioneer intends to seek a turnaround under a Hong Kong investment fund, as auto sector players scurry to adapt to technological changes sweeping the industry.

The Japanese electronics company said on Friday that it will become a wholly owned subsidiary of Hong Kong's Baring Private Equity Asia and delist its shares. Baring is to spend a total of 102 billion yen ($904 million) on the acquisition, once Pioneer officially decides to go ahead at a special general shareholders meeting set for Jan. 25.

The fund manager would invest 77 billion yen through a third-party allocation of shares and debt-equity swaps. It would also spend about 25 billion yen to acquire shares from existing stockholders, paying 66.1 yen per share -- 25% lower than Friday's closing price of 88 yen.

Pioneer plans to cut its workforce by about 15%. The company had about 17,000 employees on a consolidated basis as of the end of March 2018.

A management reshuffle is also in the cards. All of Pioneer's current board members, excluding President Koichi Moriya and two outside directors, are to resign and be replaced by officials dispatched from Baring.

"I will no longer receive compensation," Moriya said at Friday's news conference. "I hope to bring the company back to growth while tapping my savings."

Moriya, who became president in June, will receive no basic pay starting next month, while the other directors will have their compensation cut by 40% to 70%. Among those stepping down is Chairman Susumu Kotani, who has led the company since 2008.

These measures show that Pioneer has abandoned all hope of rebuilding on its own, and that the current management team will take responsibility.

Although Pioneer reached a basic agreement with Baring for a bailout in September, the Hong Kong fund has yet to make an equity investment.

At this point, Pioneer is best known for its car navigation systems and other in-car electronics. The proliferation of smartphones, however, has weighed on demand for its bread-and-butter products. Prices are also under downward pressure, while development costs are rising.

Pioneer suffered a consolidated net loss of 9.9 billion yen for the April-September period, deepening from a 7.2 billion yen loss a year earlier.

For the full year through next March, the company expects to log an operating loss of 5 billion yen, primarily due to a 5.5 billion yen loss in the mainstay car electronics business.

Automakers and parts manufacturers are facing a wave of realignment as they adjust to a new era of connected, autonomous, shared and electric cars. In Japan, auto parts maker Alpine Electronics is set to merge with its parent, Alps Electric, while car navigation systems maker Clarion will leave the Hitachi group to join French auto components maker Faureci.

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