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Wednesday, July 25, 2007
Victor, Kenwood ready for merger
Victor Co. of Japan, a struggling subsidiary of electronics giant Matsushita, said Tuesday it will officially start negotiations as early as next month to merge with Kenwood Corp. in 2008, possibly in the form of creating a joint holding company that will hold all shares of the two firms.
"The two companies will start discussion so that management integration will be implemented as early as possible," they said in a joint statement.
As a first step to a merger, Kenwood and investment fund Sparx Group Co., the biggest shareholder of Kenwood, will invest a total of 350 billion yen in Victor next month to help the ailing company rebuild its business, the statement says.
Under the agreement, Kenwood will acquire 200 billion yen in new shares issued by Victor to own a 17 percent stake. Sparx will supply 150 billion yen for a 12.8 percent stake in Victor, saying the investment will help expand Kenwood's corporate value.
This will dilute parent Matsushita Electric Industrial Co.'s stake in Victor from 52.4 percent to 36.8 percent, although Matsushita will remain Victor's biggest shareholder.
Victor, known overseas as JVC, will use the capital to rebuild its business, which has suffered from losses for the past three business years through March. In fiscal 2006, Victor posted a group net loss of 7.9 billion yen, recovering from a net loss of 30.6 billion yen the year before.
Victor and Kenwood said they will set up a joint venture Oct. 1 to integrate their car equipment divisions, which make car stereos and navigation systems, and home electronics divisions, to cooperate in production, procurement and research.
"Mergers and acquisitions, and business cooperation are effective ways to expand (Kenwood's) corporate value," Kenwood said.
The two sides will set up a joint panel after new shares are issued to discuss measures and a schedule for the merger.
Victor also announced Tuesday its financial result for the three months to June, posting 13 billion yen in group net loss on sales of 159 billion yen, down 9.7 percent from a year before. The losses were due to weak sales of DVD recorders and flat panel TVs in the domestic market. Liquid crystal display TVs and audio equipment also sold poorly in the U.S. and European markets.
Victor projects 17.2 billion yen in net loss for the full business year to next March.
Since the latter half of the 1990s, Matsushita has sought ways to push Victor out of the group due to its prolonged poor business performance. However, three months of negotiations earlier this year with U.S. investment fund Texas Pacific Group over a 100 percent sale of Victor ended without success in late May.