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Hitachi Will Buy ClarionThe sound of money |
By Alexandru Sima, Hardware Editor
11th of October 2006, 09:17 GMT
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Hitachi will pay as much as 55.7 billion yen ($465 million) for a majority stake in car audio and navigation maker Clarion, helping boost auto-related sales sixfold by 2011.
Japan's biggest electronics maker, which is Clarion's largest shareholder with a 14.4 percent stake, offered 230 yen per share and plans to buy more than half of the stock, said today in a statement. The offer is priced 52 percent higher than yesterday's close of 151 yen. The Nihon Keizai newspaper reported the acquisition plan earlier today.
Hitachi, which started a development venture with Clarion in December 2000, is targeting sales of 290 billion yen ($2.4 billion) at its car information systems unit by the year ending March 2011. Tokyo-based Clarion last month slashed its profit forecast because of price declines and lower overseas sales of its car navigation systems.
"The price is right, and it's better late than never", said Takeo Miyamoto, a Tokyo-based analyst at CLSA Asia-Pacific Markets, who has an "under-perform" rating on Hitachi. "It was clear from the start that Hitachi would have to buy Clarion to get the full benefits of joint research and development." Hitachi's sales from car navigation equipment were 44.4 billion yen last year, about a quarter of Clarion's 184.1 billion yen revenue. Hitachi bought its initial Clarion stake in 2004. "They should have done this when they bought the minority stake two years ago and the indecision is typical of Hitachi management", said the same Miyamoto.
Shares of Clarion rose 33 percent, or its 50 yen limit, to 201 yen at the 3 p.m. close on the Tokyo Stock Exchange. Hitachi fell 0.1 percent to 696 yen. Both stocks are down about 20 percent in the past six months, compared to a 5.8 percent decline in the Nikkei 225 Stock Average.
Hitachi, which also makes computer chips, nuclear power plants and flat-panel televisions, last month changed its annual profit forecast to a loss because of a charge for its power- equipment business and on losses at its hard-disk drive unit.
The forecast is a setback for Hitachi President Kazuo Furukawa, who pledged to return the hard-disk drive, liquid- crystal display and flat-panel TV units to profit this year. Clarion last month forecast net income will drop 78 percent to 1.3 billion yen, instead of an earlier projection for 3 billion yen, as sales rise 1 percent to 186 billion yen in the year ending March 2007. Hitachi is predicting a 55 billion yen net loss in the year to March 2007, compared with its April forecast for a 55 billion yen profit and with 37.3 billion yen in net income last year.
"Our business will benefit from bringing development, production and sales under one roof with Clarion", Furukawa said today at a Tokyo press briefing. Hitachi does not plan to make the company a wholly-owned subsidiary and intends to keep the company's listing on the Tokyo and Osaka exchanges, he said.
"The alliance with Hitachi would help Clarion speed up development, cost cuts and give the company the scale necessary to compete globally", declared Clarion's President, Tatsuhiko Izumi.
"Carmakers are trying to squeeze in more and more devices", said John Yang, an analyst at Standard & Poor's Equity Research in Tokyo who rates Hitachi "strong sell." It used to be just a DVD player, now it's a car navi with a hard disk.
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