Softbank to purchase majority stake in Kingston $1.5 billion deal furthers firm's effort to be high-tech power


TOKYO -- Softbank Corp. yesterday agreed to pay $1.5 billion for 80 percent of computer-memory maker Kingston Technology Corp., furthering a $3 billion buying binge that's turning the Japanese software maker into a high-tech powerhouse.

The move marks Softbank's first foray into computer hardware, giving it control of the world's largest maker of the memory modules used in computers from laptops to mainframes.

The purchase furthers Softbank's intent to have its hand in every aspect of delivering digital information -- from high-tech magazines and Internet services to computer software to network products. The company will sell the memory products through its software distribution network, the largest in Japan.

"Memory is the driver of the expansion of the whole digital industry," said Ron Fisher, vice chairman of SoftBank Holdings Inc., the U.S. arm based in Boston. "If we don't believe we can be No. 1 in a market segment, we won't enter it."

For closely held Kingston, the move means money and expertise to expand into Asia, Europe and other foreign markets.

Softbank, based in Tokyo, will pay for the purchase with some $800 million in bonds to be issued by the end of the year, $425 million in new equity and the remainder in cash from operations.

The purchase will increase the company's debt by a third to about $3.2 billion from $2.4 billion, Fisher said. Investors have expressed concern about the company's growing debt burden, but Fisher said its debt load is manageable.

After the purchase is complete, Softbank will have $1.72 of debt for every $1 of equity, up from $1.70 of debt to every $1 of equity.

The company has secured bank loans as interim financing until the bonds are issued, he said. The loan will be repaid out of proceeds from the bond placement.

The agreement was announced in Tokyo after the market closed there. Softbank shares rose 700 yen yesterday to 17,000 in Tokyo.

Last November, Softbank paid $2.1 billion for Ziff-Davis Publishing Co., making it the No. 1 publisher of high-tech magazines including PC Magazine and PC Week. Before that, it paid $202 million to purchase Intertop Expositions, which runs Comdex, the world's largest computer trade show.

More recently, Softbank has bought stakes in Internet service companies Yahoo! Inc. and CyberCash Inc. It also combined forces with Rupert Murdoch's News Corp. to pay some $380 million for a 20 percent stake in Japan's Asahi National Broadcasting network.

Softbank steps into the memory market at a time when there is an oversupply and prices are falling. Prices for DRAM -- or dynamic random-access memory -- chips will have fallen about 70 percent by the end of this year.

Kingston Technology says falling memory prices have little effect on its business since it sells the service of customizing memory modules. Profits have stayed about the same so far this year compared with last year, said Gary MacDonald, vice president of marketing at Kingston.

"We're fairly immune to memory prices," MacDonald said. "At times our margin will be smaller than others, but we've been able to maintain healthy margins through the decline of the memory market."

Kingston buys DRAM chips and then customizes boards to manufacturer's specifications. It sells primarily to computer distributors for the corporate market.

Pub Date: 8/16/96

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