Pentax Corp. said Tuesday that its board of directors scrapped a planned merger with leading optical glass maker Hoya Corp. and replaced its president.
The camera and medical equipment maker announced that senior executive officer Takashi Watanuki replaced Fumio Urano as president, a decision that came after the board voted down the merger that Urano had spearheaded.Urano was demoted to board member.
Pentax and Hoya announced Dec. 21 they would merge in October 2007 through a share swap to form Hoya Pentax HD Corp.
They said the merger would allow them to streamline their operations and strengthen the medical-equipment business. They were to finalize the details and sign a deal this month.
Watanuki told a news conference that Urano had caused confusion in the company by holding negotiations with Hoya that were secret even to the board.
"Most of the directors first heard about the planned merger when it was announced Dec. 21," Watanuki said. "How can we conclude the agreement? We can't at this moment."
The new president denied speculation that he had forced Urano out so he could kill the deal, saying Pentax would continue negotiating with Hoya about the tieup, which would include a capital alliance and business collaboration.
Although the deal was called a merger of equals, Pentax board members were reportedly concerned it would require a drastic reorganization of its camera sector, which has been in the red for the past two business years.
The digital-camera market has seen a drastic drop in prices as competition intensifies, with electronics giants such as Canon Inc. and Sony Corp. eating into Pentax's earnings.
Watanuki said Pentax's camera business returned to the black in the business year that ended March 31 and will continue to generate profits thanks to the restructuring the firm began three years ago.
In fiscal 2005, Pentax logged an operating profit of Yen 2.98 billion on sales of Yen 142.2 billion, while Hoya reported Yen 101.1 billion in operating profit on sales of Yen 344.2 billion.
The media reported that major Pentax shareholders opposed the merger ratio because they would gain little from the stock swap - one Pentax share for 0.158 Hoya share.
Hoya, which also held a board meeting Tuesday, released a statement later in the day saying it has made a proposal to launch a takeover bid for Pentax if it can gain approval from all the directors of the Pentax board.
Although Hoya received a letter from Pentax about the camera maker's decision to give up on the planned merger, the glass maker said it would continue negotiating with Pentax on the integration. According to media reports, Hoya was planning to offer Yen 770 per share but was forced to review the plan after the planned tender offer caused a split on the Pentax board.