The JVC brand is fast becoming irrelevant in the fast moving world of consumer electronics. During the past 3 years the company has failed to make a profit despite a boom in LCD TVs and camcorders.On Monday their shares crashed a further 10% with several companies backing away from taking over the company which has openly admitted that it has produced “Poor quality products.
In Australia the brand which is distributed by Dutch distribution company Hagemeyer has failed to make an impact among mass retailers with some retailers tipping that they will soon pull out of sponsoring the Nine Network show “The Funniest Home Video.”
In Australia JVC refuses to discuss the company’s plight. They have also refused to supply any of their products to SmartHouse for review despite repeated requests.
In the latest drama for the troubled CE company, shares plunged almost 10 percent Monday on reports that the company could issue new shares as part of a tie-up with Kenwood.
JVC’s parent company, Matsushita Electric Industrial Co. Ltd., said it was looking at “all available options” after the Nikkei business daily reported over the weekend that talks with the US investment fund TPG Inc. over the sale of the troubled subsidiary had broken down.
In a potential new deal, JVC would issue 20 billion yen (164 million dollars) in new shares to Kenwood and use the proceeds to repay debt, the Nikkei said without naming its sources.
Matsushita would then be likely to sell its 52.4 percent stake in JVC to a holding company to be set up by JVC and Kenwood, the newspaper said.
But JVC said in a short statement: “Nothing has been decided.” The Tokyo Stock Exchange suspended trading in JVC shares for part of the morning session pending clarification of the report. Trading later resumed and the shares closed down 49 yen or 9.92 percent at 445.
Kenwood rose three yen or 1.49 percent to 205 while Matsushita Electric Industrial ended up 35 yen or 1.40 percent at 2,535. Matsushita owns a majority stake in JVC, which was the pioneer of VHS video recorders a generation ago but has recently struggled in an increasingly competitive electronics market.
Talks with Texas Pacific fell apart after the private equity firm said it wanted JVC to sell off its music unit Victor Entertainment and asked Matsushita to continue investing in JVC to bolster JVC’s credit, sources close to the deal told Reuters.
But analysts were sceptical that Kenwood, which posted a 74 percent drop in net profit in the business year ended March due to falling audio equipment prices, would be any more successful than Matsushita to help struggling JVC battle price competition.
“Kenwood now looks like the Japanese white knight to save JVC from foreign-style demands to make quick returns, but I don’t see strategic growth from the Kenwood-JVC partnership,” said Yoshihisa Toyosaki, president of IT consulting firm J-Star Global.
Kenwood’s strength is in car audios and navigation, a very specialised market, and it does not have the expertise to succeed where Matsushita failed in marketing JVC’s consumer audio goods, he said.
Kenwood, which was originally one of the companies interested in JVC before the bidding had been narrowed down to Texas Pacific, is in talks to buy 20 billion yen ($165 million) worth of new shares from JVC and then merge with JVC under a holding company, sources familiar with the matter told Reuters on Saturday.
Matsushita would then sell part of its 52.4 percent stake in JVC to the holding company. Matsushita is aiming to get loss-making JVC off its consolidated accounts, but would likely hold on to some of its shares, the sources said.
“JVC really needs the additional 20 billion yen,” wrote Nikko Citigroup analyst Kota Ezawa in a note to investors, noting that the cash-strapped firm faces bond redemptions of 10 billion yen and loan repayments for 4.5 billion yen within the year.
Kenwood spokesman Takaaki Nose said Kenwood remains interested in JVC, as consolidation would be good for Japanese companies under pressure from overseas rivals, but he would not comment on whether it was once again talking with JVC.
“Both sides have to be of the same mindset for something like this to work,” he said.
JVC, which commands the well-known Victor brand and whose revenues are four times those of Kenwood, could be reluctant to come under the wing of its smaller rival, analyst Toyosaki said.
