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Business deals

Hong Kong fund manager to rescue struggling Pioneer

Baring Private Equity Asia's $538m will provide a reprieve for the Japanese electronics maker

Pioneer has been strapped for cash due to its struggling car navigation business.   © Getty Images

TOKYO -- Major Japanese consumer electronics maker Pioneer will stabilize its operations under the support of a foreign investment fund, Nikkei learned Tuesday.

Baring Private Equity Asia, a fund manager based in Hong Kong, will become Pioneer's biggest shareholder and lead the rehabilitation efforts. It will provide a total of about 60 billion yen ($538 million), combining equity investment and loans to the company.

Pioneer, strapped for operating cash as its automotive GPS system business struggles, faced a late September repayment deadline for bank loans. It has secured a temporary reprieve thanks to the upcoming BPEA funding.

Under the deal, BPEA will initially lend some 25 billion yen to Pioneer by the end of September. It will then make equity investments, including through third-party allotments.

Further details of the deal have yet to be worked out. The companies are considering ways to enable conversion of the loans to equity stake. 

Mitsubishi Electric is currently the top shareholder in Pioneer, holding about 7%. Pioneer's market capitalization totaled some 49 billion yen as of Tuesday.

BPEA may eventually hold a majority share in Pioneer.

Pioneer withdrew from the audio equipment and television businesses to focus on auto GPS systems, but has continued to run deficits. This summer, it started negotiating with several companies, including automotive parts maker Calsonic Kansei, on a deal involving tie-ups and investment by these companies in Pioneer.

As the talks dragged on with no signing, the deadline for the 13.3 billion yen loan approached in late September. This prompted Pioneer to accept the offer of support from BPEA, which promised swift lending.

Although Pioneer has secured a temporary reprieve, it remains in need of drastic measures to reform its car GPS business. In particular, it faces an urgent need to rehabilitate the segment, which manufactures GPS units to automakers on original equipment manufacturer contracts.

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