Victor Company of Japan (JVC) and Kenwood finally made it official last week, announcing they would merge on Oct. 1, pending stockholder approval.
The deal, which was expected, would establish JVC Kenwood Holdings, Inc. as a holding company through a share transfer and it is subject to the approval of their respective general shareholders’ meetings to be held on June 27, according to a joint statement made by JVC and Kenwood.
Matsushita Electric Industrial, JVC’s largest shareholder, and SPARX International, Kenwood’s biggest shareholder, have approved the deal.
Each JVC share will be exchanged for two shares in the holding company, and one Kenwood share will be exchanged for each share in JVC Kenwood Holdings. The holding company’s stock is expected to be listed in the First Section of the Tokyo Stock Exchange.
Kenwood chairman Haruo Kawahara will become chairman of JVC Kenwood Holdings while JVC president Kunihiko Sato will become president.
In the release, the companies reiterated its reasons for the merger which include, “the appearance of new rivals in such countries as South Korea, Taiwan and China, and increasingly fierce battles over market share and heightened competition in the global market, paralleling progress in digitization.”
In the months leading up to the official merger, in July 2007 JVC and Kenwood formally agreed to join their car electronics and audio equipment businesses. By October the company’s set up a joint venture called J&K Technologies to develop car electronics, home and portable audio products.
Now the companies plan to “grow the car electronics business into a strong profit center and increase profitability of the home audio business by expanding the role of J&K Technologies to general procurement and manufacturing.” The release went on to say that ultimately J&K would be positioned as “an operating entity standing shoulder to shoulder with JVC and Kenwood.”
Management estimates that JVC Kenwood Holdings will have $830 million in net sales, $39 million in operating income and an operating profit ratio of 4.7 percent by the fiscal year ending March 2011. That is compared with the combined numbers for JVC and Kenwood for the fiscal year of 2008, which are $823.7 million in net sales and $9.6 million in operating income.
Management sees the merged operation having four business segments as profit centers for the fiscal year ending March 2009 accounting for 84 percent of sales. Those segments and the sales share of each are:
- home and mobile electronics — 43 percent ($353.7 million)
- car electronics — 18 percent ($151.5 million)
- professional systems — 14 percent ($114.6 million)
- entertainment business — 9 percent ($72.6 million)
Management also mentions in the release it wants to develop an ” ‘unconventional’ fifth business segment” involving possibility integrating the companies’ “video, audio and wireless communications technology assets” for digital networking.
As for the effects of the merger on U.S. operations of Kenwood and JVC, Keith Lehmann, consumer electronics senior VP of Kenwood USA, told TWICE that initial integration of operations is “undecided” at this point but would “probably initially consist of basic logistics such as warehousing.”
He commented, “The profiles of each company are different. JVC is a leader in video, camcorders and audio/video. Kenwood is a leader in car audio and communications. There isn’t much overlap. Leadership will work to decide how [each brand] goes to market.”
JVC America was contacted but had no comment prior to press time.
(The exchange rate used for this story is 100 yen to the U.S. dollar.)