Pioneer Corp. received a bailout of about $540 million from Baring Private Equity Asia, just in time to help it pay back loans due this month.
The deal is not yet legally binding, although Pioneer hopes to finalize it by October, reported Bloomberg late Tuesday.
“Today is the first step toward a Pioneer reborn,” Chief Executive Officer Koichi Moriya said at a conference in Tokyo, reported Bloomberg.
“We are working as one to clinch the official contract by the end of October and come up with a restructuring plan. In five to seven years we can be growing again,” added Moriya.
Reuters quoted market analyst Masayuki Otani of Securities Japan as stating, “Pioneer’s fate depends on whether it can expand in next-generation car navigation systems for self-driving cars, and the Hong Kong fund is apparently seeing the potential there.”
But he cautioned there is a lot of competition in that space with leading automotive component suppliers.
The cost of developing new technology has climbed as competitors such as Panasonic and Bosch have “poured money into next generation cockpits for cars that make driving safer and luxurious, edging out cash-strapped companies like Pioneer,” said Reuters.
Also, Samsung’s purchase of Harman has beefed up Harman’s competitive edge.
Pioneer bet large on car navigation in the last few years, selling off its other consumer electronics businesses to focus on the automotive space, mainly OEM car navigation.
Last month, Pioneer admitted it was having trouble remaining a “going concern,” able to operate profitably. It has a September 26 deadline to repay debt of 13.3 billion yen [about $120 million].
Under the deal with Baring, Pioneer will receive a bridge loan to pay down the debt. Pioneer will make Baring a leading shareholder, issuing around 50 billion to 60 billion yen worth of shares to Baring by the end of December. Mitsubishi and NTT Docomo are also major shareholders in Pioneer.
Baring is one of Asia’s largest independent investment firms. Back in 2014, it tried to buy Pioneer’s home electronics business jointly with Onkyo, but the deal fell through.
Pioneer is also betting large on the development of 3D Lidar and digital maps for self-driving cars.
“Self-driving needs maps and we want to be the first in the world to come up with a business model based on our map technology,” Moriya said, according to Bloomberg.
Pioneer Electronics USA did not immediately respond to our request for a comment on the deal.