Tokyo (May 9, 2001) -- Nippon Columbia Co., Ltd. (Columbia),
RHJ Industrial Partners L.P., an investment fund operated by Ripplewood
Holdings L.L.C. (collectively Ripplewood), and Hitachi,
Ltd. (Hitachi) announced today that they have reached
an agreement regarding a broad revitalization plan for Columbia through
a capital infusion that includes the issuance of new equity securities
by Columbia, a spin-off of Columbia's audio/visual hardware business
(DENON), additional management from Ripplewood and continued
assistance from Hitachi.
The music software and audio/visual business in Japan has been under
pressure in recent years. Columbia addressed this environment with
the creation of high quality products and advancement in new businesses
in order to improve operational performance. Unfortunately, Columbia
has generated operating losses over the last several years. As a result,
Columbia has been searching for the appropriate revitalization plan
and today agreed that greater financial flexibility through an increase
of equity capital combined with new global management would meet this
need. Columbia's board of directors approved the revitalization plan
at a meeting held here today.
The outline of the revitalization plan is as follows:
New Management Strategy
Post-closing, Columbia will execute its business revitalization plan
under new management led by Mr. Strauss Zelnick, the company's newly
appointed Chairman. Mr. Zelnick is the former President and CEO of
BMG Entertainment, one of five major global recorded music companies.
He is the founder of New York-based ZelnickMedia and during his distinguished
17-year career within the entertainment industry was also President
of Twentieth Century Fox.
Columbia will prepare a comprehensive and unique revitalization plan
as soon as possible; one that focuses on the core business and continues
to strengthen the financial base of the company.
In addition, Columbia intends to proactively introduce management
methods such as incentive plans, making the best use of Ripplewood
business revitalization know-how and experience.
Spin-off and Transfer of Equity Securities
DENON will be separated from Columbia in a spin-off under newly established
divestiture laws in Japan. DENON's equity will be transferred to a
company set up by Ripplewood and Hitachi at closing. Columbia will
receive six billion yen in cash in this transaction.
DENON will then embark on a new strategy as a global business and
private company under the leadership of a Ripplewood industrial partner.
DENON will evaluate listing on the Tokyo Stock Exchange as a means
of raising additional capital for the business in the future.
Concurrent with the spin-off of DENON, Columbia will refocus its efforts
in the music entertainment area and software business. As a new company,
Columbia will issue to Ripplewood and Hitachi a new series of convertible
preferred stock, raising a total of six billion yen. Columbia will
also issue to Hitachi common stock of approximately four billion yen
in exchange for the debt held by Hitachi.
Once the above transactions are completed, Columbia's two largest
shareholders will be Ripplewood and Hitachi with ownership stakes
of approximately 41.7% and 27.5%, respectively.
Columbia intends to use the approximately 16 billion yen it will raise
to reduce outstanding indebtedness, invest in working capital and
for general corporate purposes. The company is committed to strengthening
its balance sheet and to further improve capital efficiency through
a bold business revitalization effort.
Columbia believes this agreement and plan whereby the software and
hardware businesses are separated and unique management teams are
created for the respective businesses is appropriate given the market
dynamics affecting each company. Columbia and DENON will each be responsible
for developing its business utilizing its management resources in
a more efficient and mobile manner while revitalizing the organization
through incentive and other plans.
Hitachi also believes that the revitalization of Columbia will succeed
under Ripplewood's leadership and is committed to giving Ripplewood
continued indirect assistance as the second largest stockholder of
Ripplewood believes that Columbia has enormous potential and its revitalization
is likely given the infusion of both financial resources and new global
management skills combined with Hitachi's assistance.
We are honored to be selected by Columbia as its strategic partner
and assist in this revitalization plan. We are excited to combine
our operational and financial resources with those of Hitachi to help
revitalize Columbia for the benefit of its employees, customers, suppliers
and investors, said Tim Collins, Chief Executive Officer of
About Ripplewood Holdings L.L.C.
Ripplewood Holdings L.L.C. is a New York-based private equity company
operating in Japan through RHJ Industrial Partners L.P. Ripplewood
manages over $3 billion of equity capital and has offices in New York
and Tokyo with over 40 professionals. The company makes investments
in promising firms, proactively participates in management and obtains
capital gains by raising corporate value, thus returning gains back
to investors such as financial institutions and pension funds. In
Japan, Ripplewood is already in the process of revitalizing the former
Long-Term Credit Bank of Japan (currently Shinsei Bank) and it intends
to invest approximately $1.2 billion of equity capital mainly in manufacturing
industry by 2004.
About Hitachi, Ltd.
Hitachi, Ltd., headquartered in Tokyo, Japan, is one of the world's
leading global electronics companies, with fiscal 2000 (ended March
31, 2001) consolidated sales of 8,416 billion yen ($67.9 billion*)
The company manufactures and markets a wide range of products, including
computers, semiconductors, consumer products and power and industrial
equipment. For more information on Hitachi, Ltd., please visit Hitachi's
Web site at http://global.hitachi.com
* At an exchange rate of 124 yen to the dollar.
About Nippon Columbia Co., Ltd.
Nippon Columbia Co., Ltd. is a Tokyo Stock Exchange listed company
with two leading brands in the audio-visual market. DENON is the name
of the company's high-fidelity line of audio equipment. The record
label business operates under the name Nippon Columbia and has a history
going back to 1910. Nippon Columbia employs nearly 1,450 individuals.