Paradigm and Sonic Frontiers Tie the Knot

The Paradigm Group announced today that they have entered into an agreement to purchase the assets of Sonic Frontiers Inc., of Oakville, Ontario, as the first step in a comprehensive restructuring plan that will lead to an expansion of Sonic Frontiers.

"It's a done deal---the papers were signed today at 1:30---we're off to the races," stated Chris Johnson, President of Sonic Frontiers.

As reported this past March, Sonic Frontiers had announced an initial deal with The Lenbrook Group that was never finalized and was called off by early June. Chris Johnson explains: "Sonic Frontiers had originally started talking with Paradigm back in October of 1997 about a possible deal, but due to a new factory project they were undertaking, Paradigm was unable to consider the opportunity at that time. By the time the Lenbrook deal had dissolved, Paradigm was ready to talk seriously again."

Within days of the Lenbrook arrangement falling through, Paradigm and Sonic Frontiers resumed their discussions, resulting in a handshake deal by the third week of June. Commenting on how quickly the deal came together, Paradigm President Jerry VanderMarel stated, "Having satisfied ourselves that the historical and cultural similarities shared by both organizations were strong enough to form the basis of a highly compatible working arrangement, it quickly became clear that a strategic alliance would help us satisfy many of our own corporate goals, including long-term product category diversification and our desire to support worthwhile entrepreneurial initiatives."

According to the announcement, "To facilitate the restructuring, shareholders of the Paradigm Group, as well as Sonic Frontiers principals Chris Johnson and Chris Jensen, have agreed to form a new company, Sonic Frontiers International (SFI)---with all parties involved at a managerial level. SFI will honor all existing and valid warranties on all products produced and sold---all existing Sonic dealers, distributors, and consumer equipment owners remain fully supported."

Unlike the proposed Lenbrook deal, there will be no new distribution channels and no "headcount reductions." Chris Johnson explains that "where there are synergies, however, we will combine resources to the benefit of both companies."

"More and more, we are seeing distinct brands in complementary product categories striking up alliances," says Jerry VanderMarel. "The benefits can include amortization of back-office and administrative costs, complementary marketing programs, complementary and mutually beneficial manufacturing and/or engineering skills, and the pooling of senior management resources. This initiative with Sonic Frontiers will permit all these efficiencies to be explored to the betterment of both organizations."

Bill VanderMarel, Paradigm's Director of Sales and Marketing and Jerry VanderMarel's brother, agrees, adding that "we will operate these both as separate companies, combining resources where it makes sense. We're not prepared, under Paradigm's name, to bring out a line of electronics since we are thought of as a speaker company. It makes more sense to keep our product categories the same and create new electronics under the Sonic Frontiers brand."

He also explained that Paradigm has two accomplished digital hardware and software engineers on staff at the Paradigm Research Center, Peter Schuck and Marc Bonneville, who will be made available to SFI for design work. In addition, Sonic Frontiers will be utilizing Paradigm's extensive in-house manufacturing facilities.

While SFI continues to develop two-channel products (within both the Sonic Frontiers and Anthem brands), the new alliance is expected to provide SFI with an opportunity to continue developing home-theater products, with an initial roll-out in late fall. These will include DVD players, surround-sound processors/preamps, receivers, amplifiers, and video enhancement components.

Also from the announcement: "SFI will continue to be located in Sonic Frontiers' current manufacturing facility, and all key Sonic Frontiers management personnel will be retained to take on equivalent roles within SFI. Sonic Frontiers' founding partners, President Chris Johnson and Vice-President of Sales and Marketing Chris Jensen, will form the senior management team of SFI. Paradigm's senior management role will be strategic, with more daily interaction in the areas of operations, administration, and product development."

Maria DiTomaso, Sonic Frontiers' North American Sales Manager, said the transition will be painless for dealers: "Sonic Frontiers and Anthem dealers should note that all new programs and price structures, as set out in their Dealer Business Guide, continue to remain in effect. It's business as usual."

In summing up, Chris Johnson commented that "last year was very 'interesting'---especially with the situation in Asia. Getting this deal done was a very important step for the company."