Japan's NEC to lend Packard Bell unit $300 million Computer seller seeks to be No. 1 worldwide

Electronics

December 27, 1997|By BLOOMBERG NEWS

TOKYO -- NEC Corp., Japan's largest computer seller, will lend $300 million to Packard Bell NEC Inc. and boost its stake in the United States' second largest computer seller to 49 percent by converting preferred shares to common shares.

The loan is necessary to support Sacramento, Calif.-based Packard Bell NEC, which has seen its business hurt by falling prices of home computers, said Seijiro Yokoyama, an NEC vice president, adding that the U.S. company needs to cultivate the corporate market.

"The loan is part of the global strategy of NEC to be the No. 1 computer seller in the world," Yokoyama said Thursday.

NEC and Packard Bell NEC together control 10.2 percent of the world computer market, the second largest share after Compaq Computer Corp. of the United States, which controls 10.3 percent, NEC said, citing a survey by Massachusetts-based International Data Corp.

Yokoyama said part of the loan is to be repaid from cash raised through an initial public offering in Packard Bell NEC scheduled for next year. He also said the U.S. unit will generate enough profit to repay the rest.

Currently, Tokyo-based NEC owns 19.84 percent of Packard Bell NEC, formed in July 1996 through the amalgamation of Packard Bell and NEC's personal computer operations outside Japan and China.

French computer company Cie des Machines Bull, which is going to guarantee 20 percent of the $300 million loan, also owns 19.84 percent. Its share will fall to 12.62, Yokoyama said.

The remaining 60.32 percent is owned by founders of Packard Bell Electronic Inc., including Chairman and Chief Executive Beny Alagem, and that will decline to 38.38 after the conversion.

NEC now owns 31.24 percent in preferred shares. After the transaction, NEC's stake in preferred shares will be 2.08 percent.

Even though NEC has invested a total of 113.5 billion yen ($873 million) in Packard Bell NEC, it doesn't want to own more than 50 percent because Packard Bell should maintain U.S. management, said Yokoyama.

Pub Date: 12/27/97

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