JVC, Kenwood to set up joint holding company

The new entity, to be called JVC Kenwood Holdings, will aim to quadruple operating profit in three years, the two companies said in a statement. The joint holding company will be created Oct. 1.

The move is the latest stage of a long-running combination plan that underscores the pressure for consolidation as competition intensifies among Japan's crowded field of small to mid-size consumer device makers.

An onslaught of South Korean and Chinese rivals have driven prices lower, and the high investment costs for digital appliances have squeezed profits, JVC and Kenwood said.

Victor, best known for its JVC brand of home electronics goods, and Kenwood, famous for its car audio systems, set share swap terms for the deal to which they agreed in principle last summer.

Under terms of the deal, Victor holders will have the right to two shares in the new holding structure for each Victor share owned, while Kenwood investors will qualify for one share in the new company for each Kenwood share owned.

The agreement was disclosed after the close of trading on the Tokyo stock exchange.

Victor ended up 7.5 percent at 285 yen ($2.75), while Kenwood finished 3.1 percent higher at 133 yen ($1.28). At the latest market prices, Victor and Kenwood have a combined market capitalization of just more than 150 billion yen ($1.44 billion).

In the fiscal year ending in March 2011, the new company aims for sales of 830 billion yen ($8.0 billion) and operating profit of 39 billion yen ($375.9 million). Combined operating profit for Victor and Kenwood was 9.6 billion yen ($92.5 million) last fiscal year.

Kenwood Chairman Haruho Kawahara will serve as the holding company's chairman, while Victor President Kunihiko Sato will become president. The new company will be based at Victor's headquarters in Yokohama, near Tokyo.