JVC, Kenwood prepare possible merger

Matsushita Electric's troubled subsidiary Victor Co. of Japan, or JVC, has concluded a capital tie-up with Kenwood Corp. as a basis for mulling a possible merger, the companies said Tuesday.

JVC will issue 20 billion yen (US$166 million; EUR120.11 million) in new shares to Kenwood and another 15 billion yen (US$124 million; EUR89.7 million) worth to investment company Sparx Group, the three companies said in a statement issued jointly with Matsushita Electric Industrial Co.

Matsushita's stake in the company will fall to 36.8 percent from 52.4 percent, and JVC's status will change from subsidiary to affiliate, the statement said.

In addition to the capital tie-up, Victor and Kenwood also agreed to work together in the car electronics and audio equipment businesses, it said.

JVC, which developed VHS-format videocassette recorders, was once a strong player in consumer electronics but its earnings have declined because of mounting competition in the audiovisual market from lower-cost producers.

It is the only subsidiary that loses money at booming Matsushita, which makes Panasonic brand products.

Founded in 1927, JVC was originally a subsidiary of the U.S. 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.