Semi-Tech acquires control of Akai

Business Wire, Jan 26, 1995

MARKHAM, Ontario--(BUSINESS WIRE)--Jan. 26, 1995--Semi-Tech Corp. ("Semi-Tech") Thursday announced that its affiliate, Semi-Tech (Global) Co. Ltd. ("Global"), has entered into an agreement to acquire control of Akai Electric Co. Ltd. ("Akai").

Akai is a well-known Japanese public company engaged in the manufacture and sale of quality video and audio equipment, electronic musical instruments and electronic parts.

Founded in July, 1929 and headquartered in Tokyo, Akai has established strong brandname recognition for its products, both domestically and overseas, particularly in such markets as Europe and South East Asia. The shares of Akai are listed on the First Sections of the Tokyo Stock Exchange, Osaka Securities Exchange and Nagoya Stock Exchange under the Code Number 6802. Group sales of Akai and its subsidiaries was 76,202,000,000 yen (approximately US$759 million) for 1993. The Akai group has approximately 2,100 employees worldwide.

Global will purchase 95,900,000 shares of Akai at 180 yen per share for a total cash consideration of 17,262,000,000 yen (approximately US$172 million). The 95,900,000 shares are new shares which will be issued subject to the approval of Akai's existing shareholders at its shareholders' meeting scheduled for Feb. 17, 1995. The price per Akai share is 180 yen, being a 57% discount to the average closing price for Akai shares on the Tokyo Stock Exchange for the last 10 trading days. The acquisition is scheduled to close on Feb. 24, 1995.

Immediately after closing this transaction, Akai will purchase an approximate 17.5% share interest in Sansui Electric Co. Ltd. ("Sansui") from Global for a cash consideration of 9,761,780,000 yen (approximately US$97 million). The price per Sansui share of 245 yen represents an 8% discount to the average closing price for Sansui shares on the Tokyo Stock Exchange for the last 10 days. This investment in Sansui by Akai will be strategic to the future business alliance between the two companies.

Commenting on the above transaction, James H. Ting, chairman, president and chief executive officer, said: "We are very excited about this opportunity to acquire Akai and its association with Sansui. Akai is well-known worldwide for its video and audio technology, a reputation it has earned over the last 65 years. Akai is also an established brandname synonymous with quality consumer electronics products. Sansui, on the other hand, specializes in high-end audio amplifier products. Akai and Sansui complement each other very well and the strategic alliance constitutes an appropriate match for a strong future business and working relationship. Akai, with its strong overseas production and parts procurement capabilities, can assist Sansui which is in the midst of shifting its production and parts procurement overseas.

Akai's main export markets are Europe, South East Asia and, in recent years, the Middle East and Africa. The Singer Company N.V. ("Singer"), a subsidiary of Semi-Tech, has a strong business foothold in these markets and also operates a global distribution network that spans over 100 countries, including developed, developing and emerging markets. Singer's distribution network consists of over 1,200 retail stores operated by Singer and its affiliates, and approximately 43,000 locations operated by independent dealers and mass merchants, as well as over 13,000 door-to-door canvassers. In a number of Singer locations, other brandname consumer electronics products are currently sold. Akai will have access to Singer's global distribution network. This should enhance Akai's sales enormously.

Akai manufactured and sold almost 2 million video tape recorders/players (VCRs) in 1994. Akai also produces VCR heads in its plant in Japan. Both Akai and Sansui have a strong Japanese engineering and technology base to develop new and innovative products for the world market.

Semi-Tech has vast experience in new market development. The Group has led in the successful formation of various joint ventures in the emerging markets of China, Vietnam and Russia. For Akai, these markets offer great potential for their consumer product lines. These same markets also offer Akai the possibility of reduced production costs. Semi-Tech will assist Akai in these endeavours."

Commenting on the viability of this investment, Ting said: "Like other Japanese electronic manufacturers, Akai went through the difficult business environment of 1992. The strengthening of the yen further reduced the competitiveness of its products and reduced its profit margins. Akai incurred losses in 1993 and 1994, eroding its capital base. In 1994, a decision was made to put in place a restructuring plan which calls for cost reduction to improve competitiveness and profitability and business expansion through the exploitation of new markets. Production in Japan will be further scaled back in favour of lower-cost manufacturing bases in Malaysia and Indonesia. Parts procurement has also been relocated to Singapore.