Matsushita in talks with Kenwood to sell JVC-media

TOKYO, Dec 23 (Reuters) Matsushita Electric Industrial Co. Ltd. has decided to sell at least half, and maybe all, of its 78 billion yen ($656 million) stake in JVC , a loss-making consumer electronics unit, and is in talks with audio equipment maker Kenwood Corp. , a financial daily reported on Saturday.

The Nihon Keizai Shimbun (Nikkei) said Matsushita, the world's largest consumer electronics maker, planned to slash its stake in Victor Co. of Japan Ltd (JVC) from 52.4 percent to less than 20 percent by a shareholder meeting next June.

The paper said U.S. private equity firm Cerberus [CBS.UL] had also offered to buy JVC through a management buy-out.

JVC's market value is around 149 billion yen ($1.3 billion), suggesting Matsushita would raise about 45 billion yen from selling a 30 percent stake.

Kenwood would use the Victor brand to strengthen its own video and audio product line up, while a sale would complete a restructuring at Matsushita, the Nikkei said.

Struggling JVC has been one of few sources of concern for Matsushita, which is otherwise enjoying blistering demand for its flat screen TVs and digital cameras.

As a pioneer of VHS-format video cassette recorders, JVC once held a strong position in consumer electronics, but new technology and intensifying competition has eroded profits.

The company incurred a 30.6 billion yen group net loss for the year ended March 31.

While JVC and Kenwood have not reached an agreement, one possibility is a business integration under a joint holding company to be set up by the two firms, into which Matsushita would sell its shares, Nikkei said.

Another proposal calls for JVC executives to acquire the shares from Matsushita through a management buy-out with Cerberus providing the necessary funds, and JVC and Cerberus are likely to present their idea to Matsushita as early as Monday, Nikkei said.

Matsushita plans to assess the separate proposals from Kenwood and Cerberus through early 2007 and make a final decision based on JVC's share price trend and sale price negotiations.

REUTERS DKS PM1336