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Hoya and Pentax companies set to merge

Hoya and Pentax companies set to merge - New company to be called Hoya Pentax HD Corporation

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Press release:
[ TOKYO December 21, 2006 ] HOYA CORPORATION (“HOYA”) and PENTAX Corporation (“PENTAX”) announced today that they have reached a basic understanding aimed at a management integration of the two companies, expected to be completed on October 1, 2007 . The new company’s name will be HOYA PENTAX HD Corporation. Under a corporate center with strategic planning functions, the new company will realign the business areas of HOYA and PENTAX. HOYA and PENTAX have recognized that they are the best possible business partners to establish a solid business structure that draws on their respective strengths. Through this management integration, the planned new structure will allow the new company to swiftly allocate significant management resources to develop strategic business areas, aiming at accelerating future growth.

1. Purpose of Management Integration
In an integration of equals, HOYA and PENTAX aim to enhance customer and shareholder value. The parties aim to achieve this through the establishment of a solid management foundation that will draw on the complementary managerial resources of the two companies to create synergies and accelerate business growth.

The common core technological platform for HOYA and PENTAX is grounded in optics, imaging and materials. Using this core platform, the two companies aim to optimize their business portfolios, focusing on the life care, optics, information technology, eye care and imaging systems areas. Expected stable revenue from the information technology and eye care areas will support the life care area to achieve strategic growth. In addition, vertical integration of the optics areas will lead to qualitative structural reform and further strengthen competitiveness.

The divisions of the new company are expected to be as follows:

* Life care area: (Major products include: endoscopes, medical accessories, new ceramics, and intraocular lenses) Life care is positioned as a strategic growth area. HOYA and PENTAX will pursue business development in the minimally invasive medical area where future demand is expected to grow. The newly integrated company will operate in areas which range from diagnostic to treatment fields, such as minimally invasive diagnosis using endoscopes and treatment using endoscopes and ancillary surgical devices, and will focus on globally cultivating bionic material markets including new ceramics and intraocular lenses. In addition, HOYA and PENTAX will enhance product development capabilities through aggressive research and development and mergers and acquisitions strategies and will strengthen sales and marketing structures in Japan and overseas. Through these measures, HOYA and PENTAX aim to double the size of their life care business.

* Optics area: (Major products include: optical glass and lenses, digital camera modules, micro-lenses, etc.) HOYA and PENTAX will vertically integrate the design, materials, lenses, processing and module groups in the optics area, which is expected to lead to qualitative structural reform and further strengthen competitiveness. HOYA and PENTAX will mutually utilize their respective manufacturing sites and customer bases, in order to secure a competitive edge against newly emerging Asian players and strongly position themselves for sustainable growth in the face of structural change in the optics industry.

* Information technology area: (Major products include: mask blanks, glass disk substrates, etc.) This is a core earnings driver where HOYA has secured a leading market position globally. The integrated company aims to further strengthen competitiveness and growth in this area.

* Eye care area: (Major products include: eyeglass lenses, contact lenses) Stable earnings growth is expected in this business. Positioning this business as another core earnings driver, the new company will continue to further strengthen competitiveness and further grow this business area.

* Imaging systems area: (Major products include: digital cameras, binoculars, etc.) In order to enhance business value, the new company will differentiate its offerings by specializing in high-value added products with unique technology and will focus on areas where it has a competitive edge. This area will be positioned as a foundation for development of new optical-related equipment and is expected to diversify into the life care and security business areas.

* New areas, other areas: (Major products include: business systems equipment, survey equipment, etc.) HOYA and PENTAX seek to invest aggressively in areas where they see future earnings growth opportunities. At the same time, they will focus on selected business areas to improve efficiency and to achieve optimal usage of managerial resources.

2. Background to the Management Integration Plan
HOYA started as an optical glass manufacturer. Since its inception, the company has been diversifying its business by leveraging its optical materials technologies and precision processing technologies. HOYA has successfully built global niche market positions through its aggressive technological innovation and has established leadership in its areas of expertise, resulting in strong earnings. In the information technology area, HOYA has maintained a leading position globally for its semiconductor-related mask blanks and glass disk substrates for hard disk drives, and it is positioned as one of the leading manufacturers in optical glass and lenses. The company has also established a leading position in the eye care area, including in eyeglass lenses. HOYA continues to cultivate new business areas, in particular medical-related areas which are positioned as mid- to long-term core growth drivers, and has initiated global business development of intraocular lenses used for the surgical treatment of cataracts.

PENTAX’s expertise stems from its long-accumulated know-how attained through the development and manufacturing of cameras and lenses. The company has successfully adapted its optical design and image processing technology for use in a variety of product areas and has developed businesses based on this optical technology. In the life care business, PENTAX has made early progress in developing a leading global position in the production of endoscopes, and it is also marketing globally various other products such as medical accessories and new ceramics for bone grafts. In its optical components business, PENTAX has leveraged its competitive edge in advanced optical technologies, where its major products include digital camera modules and DVD/CD convertible pickup lenses. PENTAX has also built a strong global brand in its imaging systems division, and the company has positioned the life care area as the focus for its mid- to long-term growth strategy. PENTAX has been working to ensure earnings improvement and company-wide growth through mergers and acquisitions, alliances and aggressive research and development activities.

While the market for advanced medical products has been growing globally with further growth expected, competition has also been intensifying. HOYA and PENTAX have been developing advanced medical products including endoscope diagnostics, minimally invasive surgical technologies, and bionic materials including new ceramics and intraocular lenses. In order to continue delivering growth in this market, it is critical that HOYA and PENTAX leverage their respective competitive advantages and make aggressive investments through mergers and acquisitions and research and development, as well as establish global sales and marketing networks at the earliest possible stage.

Significant structural changes have occurred in optical equipment and related materials since the emergence of digital cameras. Competitors in Asia have grown rapidly and are expected to continue gaining market share through low price campaigns and increasing the added value of their products. Along with existing camera manufacturers, home appliance makers have also entered the digital camera market, further intensifying competition in this segment. In order to maintain growth capabilities, cost competitiveness must be strengthened by lowering production costs and focusing on unique, high-end products. Measured structural change is necessary to ensure differentiation in this environment.

Based on the recognition that HOYA and PENTAX are the best possible business partners to establish a solid business structure that draws on their respective strengths, the two companies have reached a basic understanding aimed at management integration. Through this management integration, the planned new structure will allow the integrated company to swiftly allocate significant management resources to develop strategic business areas, aiming at future growth.

3. Method of Management Integration
Under the terms of the basic understanding announced today HOYA will be the surviving company.

4. Management Integration Timing
The merger of the two companies is planned to become effective as of October 1, 2007 .

5. New Company Name
After the management integration, the new company will be named HOYA PENTAX HD Corporation.

6. New Company Structure
(1) Corporate Governance
The integrated firm will be managed through a committee system under Japanese Company Law to ensure strong corporate governance. The board will consist of 10 directors, five of whom will be non-executive directors, further reinforcing management transparency. Three of the executive directors will be appointed from HOYA and the others from PENTAX.

Fumio Urano (current PENTAX President & CEO) will become Chairman of the Board and Hiroshi Suzuki (current HOYA President and CEO) will become President & CEO.

(2) Organizational Structure
The structure of the integrated firm will be based on the concept of a small headquarters with empowered business divisions. Allowing for an appropriate transition period, the new company is expected to have a corporate center with strategic planning functions and the business divisions outlined below. Moreover, the newly integrated company will continue to make the best possible use of the respective brands of both HOYA and PENTAX.

* Life care area: Combining HOYA’s medical division and PENTAX’s life care division
* Optics area: Combining HOYA’s optics division and PENTAX’s optical components division
* Information technology area: The remaining business after separating HOYA’s optics division from the electro-optics area
* Eye care area: The remaining business after separating HOYA’s medical division from the eye care division
* Imaging systems area: Continuing PENTAX’s imaging systems division
* New areas, other areas: Continuing other existing divisions
* Research and development: Integrating HOYA’s research and development center and PENTAX’s research and development division

7. Merger Ratio
Each shareholder of PENTAX common stock will be allotted 0.158 shares of HOYA common stock per PENTAX share.

In order to achieve fairness, the parties received advice from third party advisers in respect of the determination of the merger ratio. HOYA was advised by UBS Securities Japan Ltd. (“UBS Investment Bank”), and PENTAX was advised by Morgan Stanley Japan Securities Co., Ltd., (“Morgan Stanley”) for the basis of the merger ratio calculation. Both companies have discussed the results presented by the financial advisors, and settled at the ratio announced today.

Both financial advisors used a combination of average market price analysis, discounted cash flow analysis, comparable trading multiples analysis and other methods, respectively, to calculate the merger ratio.

Based on these analyses, HOYA obtained a fairness opinion from UBS Investment Bank, and PENTAX from Morgan Stanley, regarding the merger ratio from a financial point of view.

Neither UBS Investment Bank nor Morgan Stanley are related parties of HOYA and PENTAX.
This ratio is subject to change if there is a material change in the conditions which were used as fundamentals in the calculation.

8. Schedule
HOYA and PENTAX intend to continue discussions to conclude a definitive agreement on the management integration in early April 2007. The expected schedule is outlined below. However, as discussions proceed, if exceptional circumstances arise, the two companies may decide to change the schedule or the method of integration in their effort to achieve management integration.

1. Early April 2007: Signing of definitive agreement
2. Middle of June 2007: HOYA will hold an Annual General Meeting of Shareholders where it will seek approval for proposed changes in the company articles of incorporation and the board of directors
3. End of June 2007: PENTAX will hold an Annual General Meeting of Shareholders where shareholders will be asked to approve the merger agreement
4. October 1, 2007 : Effective merger date
5. TBA: Delivery to PENTAX shareholders of shares in the new company

Under Article 796, Clause 3, of the Japanese Company Law, HOYA is not required to receive shareholders’ approval for the merger.

9. Structure for Proceeding with the Management Integration
HOYA and PENTAX will form an integration committee, co-chaired by Fumio Urano, President & CEO of PENTAX, and Hiroshi Suzuki, President and CEO of HOYA, to ensure swift and smooth integration of the management and operations of the newly integrated company. The integration committee will review the administrative systems of each company, aiming at creating a best-practice administrative system for the newly integrated company.

10. Accounting Policies
Accounting treatment associated with the merger will be disclosed when definitively determined. The exact amount of goodwill, the probability of accrual, and the amortization period have yet to be determined, and will be disclosed in due course.

11. Expected Impact on Earnings Forecasts as a Result of Merger
The newly integrated company aims to strengthen the competitiveness of each business area and to maintain the rate of growth of corporate value.

12. Other
The newly integrated company will continue the listing status of HOYA on the First Section of the Tokyo Stock Exchange. Information regarding the new company headquarters, total assets, paid-in capital, the number of shares newly issued upon the merger, and treatment of warrants and convertible bonds issued by PENTAX, will be provided when such matters are determined.

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Comments


deviant 10 3.0k 1 United Kingdom
21 Dec 2006 3:37PM
Another one bites the dust.

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mattmatic 10 598
21 Dec 2006 3:46PM
Seems a little disconcerting just releasing a new dSLR then announcing a take-over :-|

Time will tell...
A Booth e2
12 11 4 United Kingdom
21 Dec 2006 4:34PM
Does this mean the Pentax Club is now the Hoya Club?
Ammonyte 8 4 1 United Kingdom
21 Dec 2006 4:53PM
Maybe Samsung will buy out the rights to the cameras?
Ammonyte 8 4 1 United Kingdom
21 Dec 2006 4:55PM
or have Hoya decided that the K10D is so good they had to buy the company? Smile
User_Removed 10 17.9k 8 Norway
21 Dec 2006 4:59PM
Oh dear oh dear...


Quote: aimed at a management integration of the two companies,


Quote: The new company’s name will be HOYA PENTAX HD

Something tells me Hoya's Marketing Team got the decision of the new company name. Everyone knows the name PENTAX - but not everyone is familiar with HOYA.

Oh dear oh dear...
mdpontin 10 6.0k Scotland
21 Dec 2006 7:31PM
That's the company name, not the product name. Hopefully the new company will have the good sense to keep the Pentax brand undiluted on their cameras. Then again, look at the mess Konica Minolta made of it.
McBrian 9 101 Scotland
21 Dec 2006 8:12PM

Quote: Imaging systems area: Continuing PENTAX’s imaging systems division

IMO this is a good move by both companies,the Pentax name (and more importanly the K mount) will will be kept for the imaging group just like Mitsibushi have kept the Nikon name.
User_Removed 10 17.9k 8 Norway
21 Dec 2006 9:00PM

Quote: Hopefully the new company will have the good sense to keep the Pentax brand undiluted on their cameras.

That's what I mean. When did you ever see the Mitsubishi name associated with Nikon??
MeanGreeny 8 3.7k England
21 Dec 2006 10:54PM

Quote: 7. Merger Ratio
Each shareholder of PENTAX common stock will be allotted 0.158 shares of HOYA common stock per PENTAX share.

If the allotment was above 0.95 [up to 1.05] then that would be a merger.

0.158 is a takeover
AndyBag 7 66
22 Dec 2006 9:47AM
I think you guys might be jumping a bit ahead of the game...
This is a merger, not a take-over! Both companies are optical specialists, so it makes total sense for them to join forces. I worked for Pentax not long ago, and they're enjoying a complete rebirth of the Pentax name, with global sales to support it! I think you'll continue to see Pentax cameras and Hoya filters, but with both companies enjoying better R&D investment.

Sadly, the press release is very "corporate" and has probably been just cut and paste out of a corporate/financial report - most PR agencies would issue something a little clearer and a little less wordy for general release!

So, how about a bit of support for a veteran brand instead of the usual ney-saying by the Masters of Doom?!
Pete e2
13 18.4k 96 England
22 Dec 2006 10:41AM
I agree, Hoya is a superb optical company behind many of the lenses used, not just filters. This gives Pentax an injection in the right direction rather than seeing them being taken over by some electronics giant. It's a tough market out there and the smaller players have to join forces or die.
mdpontin 10 6.0k Scotland
22 Dec 2006 11:56AM

Quote: So, how about a bit of support for a veteran brand instead of the usual ney-saying by the Masters of Doom?!

No argument from me. Long may Pentax (and Hoya) continue to thrive!
imagegrill 8 429
22 Dec 2006 1:09PM
Merger's are not necessarily a bad thing. If done right they can but both companies in a strongre position.
Time will tell on this one!
clevercloggs 10 237 2 United Arab Emirates
22 Dec 2006 3:52PM
History shows that mergers are slow moving take overs and with the name being hoya pentax I assume that in the near future you will be able to buy hoya camera's but no longer ones from Pentax.
MeanGreeny 8 3.7k England
22 Dec 2006 7:06PM
The finance world defines mergers between companies as those which take place where the total assets are within approx 5% of each other.

In addition a survey of mergers throughout Europe over the last 10 years showed that the vast majority of mergers & acquisitions were woefully unsuccessful in terms of the benefits and savings thought to be gained by the dirty deed.

In fact the company that did it [D&B?] couldn't find a single successful example.
23 Dec 2006 3:22PM
"Just hold a Hoya" somehow just doesn't sound right!
26 Dec 2006 1:13PM
Comment by AndyBag
This is a merger, not a take-over!

This is take-over.
HOYA will be the surviving company

Hiroshi Suzuki (current HOYA President and CEO) will become President & CEO.
This is the end of PENTAX Corporation.
Pentax shares will be exchanged for Hoya shares.

If this is not takeover I do not know what is?
27 Dec 2006 9:19PM
Was thinking of buying a K10 but now am not sure. I'll keep watching.
User_Removed 10 17.9k 8 Norway
28 Dec 2006 10:30AM
And you won't be alone in that line of thinking Bob. As I said above... what a Marketing disaster.
lena 8
29 Dec 2006 1:36PM
I haven't even considered the K10D !!! but anxiously waiting for the K1D coming out next year ;D
karl 10 574 United Kingdom
30 Dec 2006 11:17AM
Inevitably, the shares have to be replaced by shares from one of the companies, else there would be nothing going on.

It really doesn't matter what the company is called, they could call it "Crap Camera Stuff Inc.", that doesn't mean the Pentax or Hoya names will disappear. I dbout you'll see Hoya try and re-brand the cameras to the Hoya name, it'd be brand suicide.
User_Removed 10 17.9k 8 Norway
30 Dec 2006 1:34PM

Quote: I dbout you'll see Hoya try and re-brand the cameras to the Hoya name, it'd be brand suicide.

Effectively that's whats happened!
30 Dec 2006 1:42PM
Totally agree with Karl. If you really want a K10D and can afford one (wish I could), I can't see any problem, the quality of the camera is not suddenly going to change overnight. Mergers I'm afraid now seem to be a way of life. I would rather see Pentax continue in some kind of partnership, than perhaps disappear completely in the future.
karl 10 574 United Kingdom
30 Dec 2006 4:10PM
Mike, I've just had another quick scan, and nowhere does it say the Pentax brand will be killed - in fact it acknowledges that the Pentax name has significant value in some areas, so it would very much seem like they have no intention of killing the Pentax brand name off. As I said before, it doesn't matter what the legal entity is called, we have our limited company, but trade under 3 or 4 different names, which is what I imagine the new Hoya Pentax will do as well.
User_Removed 10 17.9k 8 Norway
30 Dec 2006 7:40PM

Quote: and nowhere does it say the Pentax brand will be killed - in fact it acknowledges that the Pentax name has significant value in some areas,

"in some areas" is the key phrase in there for me. Anything that messes with such an established Brand Name that is not handled properly is a disaster in my book.

Sure - there will be little or no problem with the hardware on the shelves but, look at the amount of discussion just here on EPZ...

I rest my case.
Perdiccas 7 90 Holy See (Vatican City State)
31 Dec 2006 5:32PM
What's all this rubbish about brand suicide? No marketeer in their right mind would re-brand Pentax cameras as Hoya, they'd be shown the door for even suggesting it.

Ever heard of the Vitec Group PLC? No? Well they bought out both Gitzo and Manfrotto and, shock horror, both brands are still there going strong in the market place and even more amazingly Vitec hasn't been brought to its knees!

The rumours of the demise of Pentax may be seriously exaggerated.
mattmatic 10 598
1 Jan 2007 10:15AM
Whatever happens it doesn't change the K10D and the existing lenses (going all the way back to the manual focus stuff) Smile
Having had the K10D for a little while, I'm sticking with it Wink
(Will have some stuff in the next week or two to show)
Stuarty 9 122 England
4 Jan 2007 11:20AM
Did anyone notice that the new board will consist of 10 directors, 5 of whom will be executive directors, 3 of which will be from Hoya, the other 2 from Pentax. So Hoya will be in charge. But we can only wait to see how the new company performs.
User_Removed 10 17.9k 8 Norway
4 Jan 2007 5:24PM

Quote: So Hoya will be in charge

...which is what I've been saying all along Folks.
Perdiccas 7 90 Holy See (Vatican City State)
8 Jan 2007 5:06PM

Quote: So Hoya will be in charge


...which is what I've been saying all along Folks.

So what difference does that make? Sod all.
19 Jan 2007 12:37PM
Sony and Minolta merged/took over what ever you may call it. With Sony and Konica-Minolta technology they came up with the A100 digital. It has caused panic amongst the established camera manufacturers! Come on Hoya-Pentax you can do the same. In any case you will always be able to buy a traditional Pentax camera there are so many about the world
FSki 8 1 United Kingdom
19 Jan 2007 6:04PM
If Hoya made camera then maybe they would drop the Pentax name, but if the new group intend to keep making cameras then it make sense to keep the Pentax name.

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