Japan's struggling electronics maker JVC has agreed to a capital tie-up with audio equipment maker Kenwood Corp. and the two companies said on Tuesday they would consider integrating their operations.

As part of the agreement, JVC, which is 52.4 percent owned by Matsushita Electric Industrial Co. Ltd., will issue a total 35 billion yen ($291 million) worth of new shares to Kenwood and Kenwood's top shareholder Sparx Group.

Kenwood will buy 20 billion yen worth of JVC shares, taking a 17 percent stake in the Yokohama-based company, while Sparx will buy 15 billion yen worth of shares, acquiring a 12.8 percent stake.

The new share issue will lower Matsushita's stake to 36.8 percent.

Matsushita, the world's largest consumer electronics maker, has been trying to reduce its JVC stake, worth about 50 billion yen, because its persistent losses have been weighing on group-based earnings.

Shares in Victor Co. of Japan Ltd. (JVC) closed up 5.5 percent at 381 yen ahead of the announcement, while Matsushita shares gained 1.3 percent to 2,370 yen and Kenwood rose 0.6 percent to 178 yen.

The Nikkei average was up 0.21 percent.

Although JVC enjoys strong demand for hard disk drive-equipped camcorders, its rear-projection television sales have been hit by sharp falls in plasma TV prices.

It is also struggling to compete with industry titans such as Sony Corp. and Samsung Electronics Co. Ltd. in the liquid crystal display (LCD) TV market.

After the market close on Tuesday, JVC lowered its group net forecast for the year to March 2008 to a loss of 17.2 billion yen from a 10.5 billion yen loss, due in part to sluggish LCD TV sales in the domestic market.

($1=120.43 Yen)

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