The merger, which will become effective next Jan. 1, is expected to generate higher economies of scale and to provide a useful exchange of information between the respective R&D teams for the development of future generations of high-index ophthalmic lenses. While Pentax has been strong in optical innovations, Seiko has been particularly strong in materials for high-index lenses, which are all produced in Japan.
On the other hand, Seiko and Pentax will continue to be sold as two distinct brands, emphasizing their distinct positioning in the market, a bit like Essilor International has done with Nikon after forming a joint venture with it in Japan. Thus, Seiko Optical Europe and Pentax Vision Europe will continue to operate as separate units for the foreseeable future, like the companies' respective entities in the USA, with Pentax targeting aboveall the multiple chains and Seiko working more closely with independent opticians. However, executives of both firms have already met and started to examine longer-term opportunities for synergies, particularly to help each other to market their products in the countries where they are strongest.
Seiko Optical Europe is based since 1992 in Germany, which is the company's largest market, and its sales have been growing rapidly in the last couple of years under the management of Akira Nakashima. It has been using an external contract laboratory for surfacing and other operations for the past 4-5 years. Pentax Vision Europe, wich is run by David Moore, will probably become a division or a subsidiary of Seiko Optical Europe. It is strongest in the UK, where it has its head office as well as a recently modernized factory employing 35 people in the manufacture of the company's mainstream products. It recently announced the availability of special European tints for plano and prescription lenses, including 1.6 and 1.67 index models, offering up to 85 percent UV absorption.
In effect, Pentax, whose ophthalmic lens operations are about half the size of those of Seiko in terms of revenues, will transfer them to Seiko Optical Products, an independent subsidiary of Seiko Corp., based in Tokyo, which also sells separately a line of ophthalmic frames, including many titanium models. In the latest financial year, ended March 31, the group's optical products business generated an operating profit of 1,159 million yen (e9m-$9.8m), versus 758 million yen the year before, on slightly higher sales of 23.3 billion yen (e182m-$198m), representing about one-tenth of the group's total turnover.
These results were slightly lower than those that Seiko had set for the division in 2000. A new business plan published a few months ago, before the deal with Pentax, set as a target for the 2005/06 financial year an operating profit of 1.7 billion yen (e13.3m-$14.4m) on sales of 25.8 billion yen (e201m-$219m). Seiko said at the time that the optical division would concentrate its management resources on expanding sales of high-index lenses to achieve this goal, while improving the efficiency of procurement and merchandising in frames. Overseas, Seiko Optical would endeavor to raise technical support for the retailers' in-house laboratories in order to secure top market shares in ultra-high-index lenses.