Well, the sad news is official. According to Business Wire, Pioneer has sold its entire DJ equipment division to global investment and equity firm KKR for a reported $551 million. When the financials are complete, a new “PJDHD” holding company will emerge, which KKR and Pioneer will own 85.05%/14.95% respectively. Presuming the deal clears all legal hurdles, it’s slated to be complete by March 2015. Pioneer claims that this sale is motivated by a desire to “accelerate our efforts to concentrate management resources on our car electronics business.” In short, Pioneer doesn’t want to be financially responsible for figuring out how to keep their DJ business lucrative long term. It apparently sees more potential in the automotive market.
So the big question now becomes, What happens next? Private equity buyouts, where the investment firm essentially pays for the rights to the company and to manage it, can be used for a number of things. KKR describes their own historical process as follows: “We invested our own capital, alongside third-party equity dollars and borrowed money, to pursue friendly acquisitions of businesses with good fundamentals and growth potential. Beyond mere capital, however, KKR made an additional investment of time as actively engaged board members whose long-term interests were clearly aligned with those of the company’s other equity partners. After several years working in partnership with a portfolio company’s management team to increase the value of the business, we would sell our stake and distribute profits to our investment partners.”
It’s way too early in the process to now what’s in store for the division that spawned CDJs, RekordBox, and HDJ headphones. We doubt CDJs or HDJ headphones will ever disappear completely, but we do have a few theories about their future we think would be fun to explore.
[divider]Product Lines Are Dropped & A New Company (or Companies) Emerges[/divider]
Pioneer DJ has a huge product offering. Turntables, headphones, controllers, software, loudspeakers, mixers–each which could conceivably support itself as a business. There’s tons of precedent for this in the technology sector. In 2008 Motorola spun its mobile and home products into a new company called Motorola Mobility. With Pioneer retaining just shy of 15% equity in the new holding company, the intention may very well be to splinter Pioneer DJ’s offerings into smaller, more nimble companies that are independently run but still bear the Pioneer badge.
[divider]KKR Slashes PDJ Product Lines & Sells A Slimmed Company…Back To Pioneer[/divider]
Similarly, there’s a real possibility that Pioneer knows their DJ division is bloated, but doesn’t want to do the heavy lifting of sorting it out. Pioneer is a global firm with a market cap of $115 billion. They have many other things to manage than a DJ equipment business. However, with the booming EDM economy not slowing down, they would also be crazy to toss the crown just as power was seized. Offloading the job of hack-slashing to a third party means that, in a few years, Pioneer could buy back a more energetic DJ business from KKR using the newfound profits of having paid off debt and focused on autos.
[divider]Someone Else Buys Pioneer DJ & Rebrands It As Their Own[/divider]
We have a hard time thinking of any Pioneer competitor with the deep pockets to buy PDJ, but that doesn’t mean it couldn’t happen. Companies like Rane, Serato, Akai, and Native Instruments are privately owned and held. This makes it difficult to get an accurate picture of just how much they have to spend–or how much they’re willing to borrow. Companies like Serato and Native Instruments could completely monopolize the market if they figured out an innovative way to combine Pioneers products with their own. Combining the functionality of Traktor, RekordBox, DJ Controllers, and the versatility and familiarity of CDJs once and for all could be a game-changer.
[divider]CDJs & All PDJ Equipment Gets Melted Down And Turned Into A Transformer[/divider]
We don’t like to be sensationalists, but who really knows what masterminds own KKR? Could their plans for world domination involve acquiring the necessary electronics and sheer mass of elements from Pioneer DJ? It seems very unlikely, but it would give credence to the idea that dubstep sounds like two earth-shatteringly large robots having battle sex.
What do you think will happen to Pioneer DJ? Share your opinion in the comments!
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