Cautious JVC Deal A Reality

By Steve Smith -- TWICE, 8/6/2007

After months of hints, rumors, anonymous reports and other musings from interested onlookers, Matsushita, marketers of the Panasonic brand worldwide, has given up control of Victor Company of Japan (JVC). The official announcement was made that JVC will merge with Kenwood.

But of course that's not exactly what the official announcement said. (See p. 1.) Maybe something was lost in translation, but by all indications that is exactly what was decided a couple of weeks ago and will happen eventually.

Technically, JVC and Kenwood are taking the first steps in a full merger when they join their mobile, home and portable audio businesses in October. JVC and Kenwood in the United States don't know yet how their operations will change; new stock will be issued by JVC to Kenwood and Matsushita's stake in JVC would be reduced from 52 percent to 37 percent.

Of course, if this were a transaction between U.S. companies, a complete merger would have already closed months ago, probably with U.S. equity firm TPG, which reportedly placed the high bid on this deal, now owning JVC. Maybe it is the cultural differences, maybe it is just plain caution, but Matsushita, JVC and Kenwood have decided to take a gradual approach.

A deal like this has been rumored for years. Industry types have speculated how and when Matsushita would give up control of JVC since the 1980s at least. Only after new management at Matsushita came in during a time when JVC was posting net losses for three years, did something finally give.

During the spring, when anonymous speculation was rampant, people very close to JVC told this reporter that top managers in Japan were "looking forward" to a merger because without Matsushita around, they would be free to explore more new technologies.

In this dramatically changing industry JVC and their soon-to-be new partners at Kenwood will have that freedom. As the old saying goes, watch out for what you wish for because you just may get it.

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