TOKYO -- Japan's Pioneer Corp. secured a bailout worth up to 60 billion yen ($540 million) from Baring Private Equity Asia, after failed bets on car navigation and audio systems saddled it with debt and pushed it into the red.
Under the terms of the deal, the once-popular stereo maker said it will issue around $448 million-$540 million worth of shares to Baring by the end of December and obtain a $224 million bridge loan from the Hong Kong investment firm next week, allowing Pioneer to pay down a bank loan due later this month.
Its shares, however, tumbled 9.3 percent on Wednesday on worries of earnings dilution and as doubts remained about whether the fund infusion and Baring's backing would be enough to pull the company out of the doldrums.
"Pioneer's fate depends on whether it can expand in next-generation car navigation systems for self-driving cars, and the Hong Kong fund is apparently seeing the potential there," said Masayuki Otani, chief market analyst at Securities Japan.
But Otani said Pioneer "will face a very tough race with major automotive component suppliers" and that it is at a disadvantage "because it doesn't have any major automakers as large shareholders."
After selling its consumer electronics business in 2014, Pioneer focused mostly on car navigation systems, a technology rendered largely obsolete thanks to maps available on smartphones.
Development costs for advanced navigation systems have soared as companies including Panasonic Corp. and Bosch have poured money into next-generation cockpits for cars that make driving safer and luxurious, edging out cash-strapped companies such as Pioneer.
Meanwhile, deep-pocketed rivals such as Samsung Electronics have altered the competitive landscape with acquisitions of smaller firms including Harman International.
After Wednesday's share drop, Pioneer's market capitalization was less than $404 million, potentially smaller than the lifeline it will receive.