U.S. buyout specialist Carlyle Group and Kyocera Corp. are right now announcing details of their purchase of keitai mini and Personal Handy Phone (PHS) operator DDI Pocket from KDDI. Carlyle and Kyocera are expected to snap up a 90 percent stake in DDI Pocket in the $2.1 billion deal. The purchase is sure to give Kyocera, a major PHS phone and base-station maker, a platform to hit the booming China market and gives KDDI a chance to offload the strugging DDI unit (now down to its last 3 million subs) as au concentrates on improving its CDMA 1X EV-DO WIN service against a resurgent DoCoMo. Under the deal announced yesterday, Carlyle will own 60%, Kyocera 10% and KDDI will keep the remaining 10%.
KDDI currently owns approximately 81% of DDI Pocket. Kyocera, which currently owns about 13% of DDI Pocket will expand its focus on PHS related products business.
Carlyle would become the controlling shareholder.
Carlyle has said that it will not cut jobs or reduce salaries for DDI workers and claims the purchase will have no negative impact on the company.
DDI Pocket’s subscribers have been increasing over the last several years in its core service of flat-rate mobile data communication services (Air H”), and DDI Pocket has been growing strongly as the leader in the mobile data communications market, according to a press release issued by Carlyle.
Carlyle sees growth, as does DoCoMo in PHS data services.
Today’s agreement is a result of Carlyle forming a consortium with Kyocera and approaching KDDI regarding a potential investment in DDI Pocket, and KDDI’s decision to accept the proposal in light of its renewed focus in its core businesses, the partners said.
Carlyle and Kyocera have promised “powerful support” for Japan’s 160,000 base station PHS infrastructure. DDI Pocket will offer new, higher speed services with flat rates aimed at the corporate data communications market.
Kyocera president Yasuo Nishiguchi said Kyocera planned business expansion in foreign countries (which means, primarily, China).
The entire operations of DDI Pocket will be separated and merged into a special purpose company held by the Consortium, in which Carlyle, Kyocera and KDDI invest, in exchange for which the Consortium will pay JPY 220.0 billionn in cash. Any cash remaining after repayment of net interest-bearing debt of DDI Pocket outstanding at closing will be paid to existing DDI Pocket shareholders, after which DDI Pocket will be liquidated.
The partners will sign the contract on June 21, and merge on October 21 to form NewCo. DDI pocket will be liquidated in March 2005.
The transation will be on borrowed money supplied by a syndicate of domestic and foreign financial institutions, and equity capital from new shareholders.