Tokyo — Victor Co. of Japan (JVC) and Kenwood said Tuesday they have formally agreed to join their car electronics and audio equipment businesses, while considering a complete business merger in the future, according to reports out of Japan.
As part of their alliance, JVC will issue $288.7 million in new shares, selling $164.9 million worth to Kenwood and $123.7 million to Sparx Group, Kenwood's top shareholder.
The new shares will reduce Matsushita Electric Industrial’s stake in JVC to 37 percent from 52 percent, allowing it to stop treating JVC as a consolidated subsidiary and handle it as an equity-method affiliate. JVC's net results will be reflected only in Matsushita's bottom line when the deal is completed, with sales and other results remaining unaffected by JVC, the companies said in a joint statement.
The announcement comes after reports of on-again, off-again bids by outside suitors for a portion of Matsushita's stake in the electronics company. Kenwood was an early bidder for Matsushita's JVC stake and then dropped out before U.S. equity firm TPG reportedly came up with the high bid for the stake.
But Matsushita, Kenwood and JVC continued to work on alternative solutions that were more attractive to all three companies.
Also on Tuesday, JVC reported that its group net loss deepened in the April-June quarter due in large part to continued price compression in consumer electronics products.
The company posted a group net loss of $106.8 million, compared with a group net loss of $28 million a year earlier.
Group sales declined 9.7 percent to $1.3 billion from $1.45 billion.
For the fiscal year to March, JVC revised its earnings downward. The company said it now expects a group net loss of $141.8 million, deeper than its previous forecast for a 486.6 million loss. It also revised downward its group sales outlook to $610 million, compared with its May sales outlook of $626 million.