Panasonic Sells Off Security Side of Business

Polaris Private Equity Fund IV, L.P., etc., managed by Polaris Capital Group Inc. have recently agreed to a strategic capital alliance with Panasonic Corp. to acquire 80 percent of the outstanding shares of the company to be newly established by Panasonic to succeed the Security Systems Business.

• By Ralph C. Jensen
• Jun 03, 2019

Polaris Private Equity Fund IV, L.P., etc., managed by Polaris Capital Group Inc. have recently agreed to a strategic capital alliance with Panasonic Corp. to acquire 80 percent of the outstanding shares of the company to be newly established by Panasonic to succeed the Security Systems Business. The new company, which will retain the Panasonic brand, and they are expected to increase investment into R&D and the business.

The Security Systems Business has evolved over the past 60 years, and developed its presence by combining advanced edge devices such as security cameras developed to meet the needs of the market, as well as software with features such as face authentication. Through these efforts, it has established a leading brand position in the security camera market in Japan. 

A Polaris statement says it believes that the security-related businesses will grow in response to increase in the awareness for security and safety. The strategic capital alliance aims to support the newly established company in order to realize exponential growth.

Polaris has experiences in multiple projects of strategic capital alliances with manufacturers and large-scale companies. The company expects it will smoothly and rapidly build the structure necessary for an independent business, while maintaining the strengths and unique characteristics of the business. In addition, it is aimed to strengthen solutions capabilities with an eye to aggressive alliances and M&A strategies, leverage these strengths to expand its earnings base on a global scale, centered on the North American market, provide new products and services for the next generation, and expand sales of camera modules for medical devices.

The Security Systems Business will strive to maximize its corporate value as an independent company toward IPO in the future. The transaction is expected to be completed on Oct. 1, subject to the approval of the relevant authorities.

Neither a price paid nor revenue for the business was disclosed.

According to IPVM blogger John Honovich, “the valuation to be low (1x revenue or lower) given the challenging conditions this business has faced over the last few years (race to the bottom, OEMing Dahua.

“Despite these challenges, Panasonic's video surveillance annual revenue is still likely in the hundreds of millions globally, though lower than companies like Avigilon, Hanwha and Uniview who are all now larger, in the half-billion annual revenue range.”

The New Company will be formed with Security Systems Business Division of Connected Solutions Company of Panasonic as a main body and will include the industrial & medical vision compact camera R&D department of its Innovation Center [emphasis added]

This will include three operations, Surveillance Systems Business (Intelligent Surveillance), Industry-Specific Businesses (Public Solutions), Modules Business (Industrial & Medical Vision). While the “medical vision” element is certainly not security.

Sales will be handled differently across the world:

• in Japan, through Panasonic Japan
• in North America, through the new company's own internal sales team
• All other territories, through existing Panasonic regional sales companies

Moreover, Panasonic's China factory is included in this deal that was put for sale in 2018 but never sold.