(Yicai) April 1 — Shares of TCL Electronics surged after the Chinese consumer electronics giant said it finalized the deal to take a majority stake in a new joint venture that will control Sony’s home entertainment business for a total of JPY75.4 billion (USD475 million).
TCL Electronics [HKG: 1070] closed up 9 percent at HKD13.91 (USD1.77) in Hong Kong today, after earlier gaining as much as 13.7 percent.
Sony will establish a wholly-owned subsidiary that will take charge of its home entertainment business, and TCL will subscribe to 51 percent of the new company’s shares, the partners announced in separate statements yesterday. Sony will retain the remaining 49 percent of the shares.
Sony’s home entertainment business includes product development, design, manufacturing, sales, logistics, and customer service for products such as Bravia’s consumer televisions and business-to-business flat panel displays, B2B light-emitting diode displays, projectors, and home audio equipment.
As part of the deal, TCL will also acquire a 100 percent stake in Sony Emcs Malaysia, which is responsible for the manufacturing of Sony’s home entertainment products, the pair noted, adding that they will continue discussions regarding the transfer of all or part of the equity in Shanghai Suoguang Visual Products, another entity producing Sony home entertainment products.
Based on the equity value of the above two businesses and the ownership ratios, TCL is expected to pay Sony JPY75.4 billion (USD475 million), but the final amount will be determined after further adjustments for certain net debt and working capital at the time of closing, the two companies pointed out.
The transaction, which is subject to regulatory approval among other conditions, is expected to be completed by April next year, when the JV is scheduled to commence operations.
Sony will sign licensing agreements with the new company for patents, proprietary technologies, and brand rights. Under the deals, the JV will sell products carrying the globally recognized Sony and Bravia names, aiming to create new customer value. It will also strive to develop innovative products that meet the expectations of customers worldwide and achieve further business growth through outstanding operational excellence.
The deal also stipulates that Sony has the option to sell all or part of its stake in the new firm at an agreed price on an agreed date to safeguard the rights and interests of minority shareholders.
“I am very pleased that we have signed definitive agreements with TCL for a strategic partnership in the home entertainment field today, gaining an excellent partner,” said Kenji Tanaka, president and chief executive officer of Sony. “Through the new company, we will strive to provide new customer value to a global audience and achieve further growth in the home entertainment field.”
“Through this collaboration, we plan to jointly leverage our respective core strengths in branding, display technology, sales channels, supply chains, etc,” said Du Juan, chairperson of TCL. “Together, we aim to drive the global development and premiumization of the new company, delivering superior products and services to consumers worldwide.”
TCL and Sony first announced their intention to team up on the home entertainment business in January. However, the pair had yet to finalize the details at the time.
This is one of the few mergers and acquisitions among globally leading TV brands in the past two decades, Zita Zhang, deputy general manager of the large-size display business research department at Sigmaintell, told Yicai. “It will have a comprehensive and far-reaching impact on the entire market.”
TCL’s global TV shipments totaled 30.7 million units last year, ranking second to Samsung with 35.3 million units, according to Sigmaintell data. Sony’s shipments amounted to 4.1 million units.
After the deal is closed, TCL’s TV shipments are expected to challenge Samsung’s position as the world’s leading TV maker within two years, said Rong Chaoping, deputy director of research at AVC Revo.
Once the new company commences operations, the combined market share of Sony and TCL is expected to surpass Samsung’s to rank first globally, Zhang said. This will rewrite the global TV market’s competition landscape that has persisted for decades and will be the first time that a Chinese TV brand has challenged for the throne, she added.
TCL will elevate the market positioning of its products to the ultra-premium level, leveraging the Sony and Bravia brands, and raise its share in the global high-end TV segment by tapping into Sony’s existing sales network, Zhang pointed out.
Editors: Tang Shihua, Futura Costaglione
‘ The preceding article may include information circulated by third parties ’
‘ Some details of this article were extracted from the following source www.yicaiglobal.com ’
