Struggling electronics maker JVC, part of the Matsushita empire, agreed yesterday on a capital tie-up with fellow Japanese high-tech firm Kenwood Corp leading to a merger.
Matsushita, best known for the Panasonic brand, will slash its holding in JVC, which will immediately team up with Kenwood to expand in areas such as car stereo systems.
JVC -- Victor Co of Japan -- was the pioneer of VHS video recorders a generation ago but has recently struggled in an increasingly competitive electronics market.
Under the plan, JVC will issue a total of ?35 billion (US$290 million) worth of new shares to Kenwood and investment firm Sparx Group Co, Kenwood's top shareholder, the companies said in a statement.
"On the condition that the two companies' management remain stable, JVC and Kenwood are beginning to look at management integration on an equal footing at the earliest time," the companies said.
HOLDING COMPANY
They plan to set up a new holding company which will fully control the two firms, they said.
With the issue of new shares, Kenwood will control 17 percent of JVC while Sparx Group will own 12.8 percent, the companies said.
The shareholding of JVC's parent firm Matsushita Electric Industrial Co will decline from 52.4 percent to 36.8 percent but it will remain the biggest shareholder, they said.
Founded in 1927, JVC was originally a subsidiary of the US record company Victor, but cut those ties during World War II. It continues to use Victor's symbol of the dog Nipper listening to his master's voice over a gramophone in Japan, but is not allowed to do so overseas.
JVC's performance has been a drag on otherwise profitable Matsushita, the world's largest maker of consumer electronics.
MATSUSHITA FORECAST
Matsushita said yesterday it had cut its forecast of net profit by 2 percent to ?246 billion in the year to next March due to JVC's stagnant performance.
JVC separately announced its net loss swelled to ?13 billion for the first quarter to last month from ?Y3.4 billion a year earlier, while revenue fell 9.7 percent to ?159.03 billion.
JVC reported an operating loss of ?6.30 billion, compared to ?1.9 billion a year earlier. The company said the losses were mainly due to a slump in sales of flat screen TVs and audio equipment.
JVC also downgraded its forecast for the full year to next March, seeing a net loss of ?17.2 billion and operating profit of ?8.1 billion on revenue of ?740 billion.
It had earlier projected a net loss of ?10.5 billion and operating profit of 15 billion on revenue of ?760 billion.
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