Topcon to Acquire Sokkia

Mar 24, 2007
GPS World

Topcon Corp. announced it has come to a "basic agreement" to acquire Sokkia Company Limited (Sokkia). If approved by the Japanese Fair Trade Commission (FTC), Sokkia will become a Topcon subsidiary and will be renamed Sokkia Topcon. Because both companies are headquartered in Japan, the transaction is subject to approval by the Japanese FTC with respect to anti-trust regulation. Topcon states that further details will be released after the Japanese FTC has commented on the proposed acquisition.

The announcement states the reason for the merger of the two companies is to maintain an edge in the increasingly competitive worldwide surveying instruments market. Competitors Leica Geosystems AG and Trimble Navigation Ltd. have been acquiring companies to increase market strength for some time. The announcement also gives increased competition from Chinese manufacturers as another driver for the Sokkia acquisition.

Surveying instruments (Positioning Business) is the largest business segment of Topcon Corp., as it produced approximately $400 million in revenue in fiscal year 2006 (ending March 2006). Other business segments include Opthalmic/Medical, Industrial, and Optical Devices instruments. Companywide revenues for FY2006 were approximately $913 million. According to the company, it implemented a mid-term growth strategy in FY2006 targeting annual revenue of $640 million for the Positioning Business segment.

Sokkia's sole business is surveying instruments. Its worldwide FY2006 revenues for the same period were approximately $187 million.

Both companies have formidable worldwide distribution channels. No details have been released about how the acquisition will affect the two channels, although the announcement mentions that the Sokkia brand will be maintained for an interim period.

NovAtel Role. An area of ambiguity is Sokkia's joint venture with NovAtel, Inc., of Calgary, Alberta, Canada. NovAtel designs GNSS technology that Sokkia incorporates into its GNSS surveying products through a joint venture named Point, Inc., established in 1999. Sokkia owns 51 percent of Point while NovAtel owns 49 percent.

Topcon has a solid investment in GNSS technology, which began with its acquisition of the former Javad Positioning Systems in July 2000. Since FY2004, Topcon has experienced record revenues for each year and strong growth in the GNSS receiver sector, while becoming a leader in producing receivers that use both GPS and Russian GLONASS satellite signals.

Following the Topcon announcement, NovAtel CEO Jon Ladd responded that "NovAtel and Sokkia have existing contracts in place under which NovAtel develops and supplies GPS technology and products to our joint venture Point and ultimately to Sokkia. We do not expect the proposed combination of Topcon with Sokkia to affect our business relationship with Sokkia, for the foreseeable future. We continue to work with Sokkia management to develop new GNSS technology that will be incorporated into the Point/Sokkia product family." According to NovAtel, the Point agreement is effective until July 2009.

Furthermore, Hitoshi Ito, president of Sokkia Co., Ltd., stated, "We value our relationship with NovAtel and do not expect there will be a material change to our relationship."

According to NovAtel, the Point venture accounted for approximately $9 million of NovAtel's $67 million total annual revenue in FY2006.

Source: http://sc.gpsworld.com/gpssc/article/articleDetail.jsp;jsessionid=GHjkDVyTgvQmYPPVybyGxR7mGhCYWG3pJYfz1mSnhrTKbXKnj6Rv!284891640?id=414512