Victor Company of Japan, Limited (JVC) and Kenwood Corporation
entered into a capital and business alliance agreement, the focal
points of which relate to their business cooperation in the areas of
car electronics and home/portable audio businesses.
The companies announced the alliance on on July 24, after the
meetings of their respective Boards of Directors.
"The consumer electronics industry is dominated by digital products
which require significant capital investments and massive software
development processes," JVC said in a statement. "In addition, the
digitization trend has shortened product development cycles and led
to fierce market-share and pricing competitions. Finally, the rise of
Korean, Taiwanese and Chinese manufacturers has further intensified
the competition in the global market," the company added.
JVC reported net losses for three consecutive fiscal years, including
the fiscal year ended March 31, 2007, and its urgent task is to
implement a fundamental management reform. It is currently in the
process of implementing a management reform based on the voluntary
reconstruction plan which was announced on May 30, 2007.
Furthermore, JVC has set the "Action Plan 2007" based on its
realization that further steps for more aggressive management
reform need to be taken in order to ensure a management
reconstruction in the increasingly more competitive market and to
regain the market?s trust.
Under such market environment, JVC and KENWOOD have agreed that the
planned capital increase through third party allotment will be
treated not as a mere transfer of capital, but as a strategy, in
conjunction with the commencement of cooperation in the car
electronics and home/portable audio businesses which both of them are
With respect to the business cooperation which is scheduled to begin
in October 2007 under the structure currently contemplated, the scale
of the combined car electronics business of the two companies will be
approximately 160 billion yen, which is expected to lead to an
increase in their added values and enhanced market competitiveness,
through business integration in the areas of development, materials
procurement and production.
Further, for the management integration which is targeted for 2008,
the establishment of a joint holding company will be considered, in
order to pursue the synergy effect in all aspects of management of
the two companies and to enhance their respective corporate values.
Matsushita, JVC's largest shareholder, has approved the JVC-Kenwood
alliance. "Matsushita has determined that the optimal path to JVC?s
speedy recovery and increase in corporate value is for JVC to gain
the cooperation of KENWOOD which has a thorough understanding of the
relevant business, to implement the ?Action Plan 2007? announced by
JVC today, and to commence efforts for business cooperation which
takes into consideration possible management integration with
On the target date of October 1, 2007, KENWOOD and JVC shall commence
the business alliance with respect to their car electronics and home
electronics businesses. Specific implementation plans, their detailed
schedules, etc., shall be considered and determined by the
Collaboration Committee consisting of the two companies; however, the
business alliance is expected to involve the establishment of a joint
framework of research and development through a joint venture, etc.,
mutual promotion of manufacturing services and mutual utilization of
intellectual property rights.