RCA in Joint Venture With Chinese Company
Nov. 03, 2003
PARIS (AP) _ Thomson SA, the French consumer electronics company that now owns RCA, and fast-growing Chinese manufacturer TCL International Holdings Ltd. announced a joint venture Monday with the lofty ambition of becoming the world's top TV maker.
That means the legendary American television brand RCA is headed for Chinese control.
TCL will own two-thirds and Thomson will own one-third of TCL-Thomson Electronics, which is expected to generate annual revenue of more than euro3 billion ($3.49 billion).
``This consolidation will permit the creation of a leader in the domain of televisions _ we think the very leader in terms of volume,'' Thomson chief executive Charles Dehelly said in a conference call.
Under the agreement, Thomson will contribute all its television manufacturing plants and businesses in Mexico, Poland and Thailand and its DVD player businesses into the venture. TCL is to contribute its plants in China, Vietnam and Germany.
Thomson chief financial officer Julian Waldron said the venture will produce 18 million TV sets and 3 to 4 million DVD players each year. It will use TCL as its key brand in Asia and emerging markets, Thomson as its major brand in Europe and the RCA brand in North America.
The new company is expected to be established by mid-2004. The deal is subject to the signing of definitive agreements and approval by regulatory authorities.
Already China's market leader, TCL is looking for a springboard into new foreign markets, executives at both companies said.
TCL has enjoyed explosive growth in the Chinese market, where 40 percent of households own TVs and rising consumer wealth is expected to fuel more demand in the future, Dehelly said.
The alliance moves the Chinese company far beyond its previous goal of becoming one of the world's top five TV producers by 2006, challenging industry giants like Sony Corp. and Matsushita Electric Industrial Co.
``The merger is a major initiative in our global business expansion, bringing TCL into a new era,'' Chairman Li Dongsheng said.
The combined business will blend ``the rapid growth of our TV business in emerging markets together with Thomson's state-of-the-art technologies and unrivaled'' research and development capabilities, Li said.
Analysts said TCL, listed in Hong Kong, will gain a quick entry into the developed U.S. and European markets through the alliance with Thomson.
``Ultimately, TCL is getting two huge markets, where people are moving into high-end digital and high-definition TVs,'' UOB Kay-Hian Securities analyst Chris Cheung said. ``A joint venture with a strong, established player is a good way to go.''
Thomson gets more than half its revenues from the Americas, and 34 percent in Europe.
Thomson has been moving away from its original core activity of consumer electronics since 1997 and shifting into higher-margin digital processing and licensing services. The company produces VHS videocassette recorders and MP3 players and owns Hollywood film processor and distributor Technicolor.
After the deal's completion, consumer electronics will only represent 23 percent of Thomson sales, compared with 69 percent when it began the strategy.
The original Radio Corporation of America, or RCA, introduced televisions to the world at the 1939 World's Fair in New York, under the leadership of famed entrepreneur David Sarnoff, according to RCA's Web site.
Dehelly said the company would swap its one-third share in the new entity for a direct stake in TCL within 18 months of joint venture's formation. He said Thomson was targeting a 30 percent stake in TCL, depending on the size of its business when the transaction is completed.
Li said that would make Thomson the second-largest shareholder after its mainland parent, TCL Corp.