Sega Toys will acquire Taiyo Kogyo's radio control toys (automobile and aircraft models that can be operated remotely via radio frequency) business. The transaction is due to February 28, 2007 with the acquisition cost expected to be \113 million. Sega Toys established its wholly-owned subsidiary "Taiyo Co., Ltd." as a company to take over the acquired business at \50 million on February 15, 2007.
Amid the current trends in which the toy market gets smaller due to the decreasing number of children, among other factors, Sega Toys has focused on toys based on a concept of "entertainment for adults" as evidenced by the "Brain Trainer" series designated to train older people's brain, "Homestar" home planetarium and "Grand Pianist" miniature grand piano embedded with automatic tune player capability, among other products. The company has decided the business acquisition as part of this "adult-oriented" products enhancement. According to Sega Toys, 2006 Christmas sales of radio control toys such as helicopters and aircrafts for indoor play grew primarily towards male customers in their thirties and forties.
The business transaction includes inventory assets, furniture, commodities, molds and intellectual properties. Although the personnel, lands and buildings are not included, most of initial 44 employees (as of the establishment) at the new company "Taiyo" are those who transfer from Taiyo Kogyo. Since Sega Toys has no expertise concerning radio control toys, the company's PR spokesperson said, "We will pay respect to Taiyo Kogyo's expertise and atmosphere even after the acquisition." The new company will also lease room at Taiyo Kogyo's headquarters in Taito, Tokyo, marketing base in Ibaraki, Osaka and Development Center in Higashine, Yamagata, and take over the "TAIYO" brand. Moriaki Umezu, current Vice President of Taiyo Kogyo, will become the new company's president, with "low-rank executives dispatched from Sega Toys" (Sega Toys PR). The new company will take over Taiyo Kogyo's current distributors and suppliers as well.
Taiyo Kogyo to liquidate
The business that Sega Toys will acquire posted a 22% year-on-year sales decline to \1.782 billion in FY2005 (May 2005 to April 2006). Operating loss reached \521 million that year. Taiyo Kogyo has long been dedicated mostly to the radio control toys business and its current president Ken Kuronuma and the remaining staff will advance the company's liquidation by disposing lands and buildings after the business transaction.
"Expecting a synergy from our expertise concerning project and development of adult-oriented products and Taiyo Kogyo's expertise in radio control toys," Sega Toys estimates sales of \2.5 billion and recurring income of \30 million for FY2007 (April 2007 to March 2008) at the new company.