Victor Co of Japan (JVC), an affiliate of Panasonic maker Matsushita Electric Industrial, produced Japan's first television set and was the pioneer of VHS video recorders.

But it has recently struggled in an increasingly competitive electronics market and said last month that it would stop almost all domestic production of flat-panel televisions.

'In the current consumer electronics industry, global competition over market share and prices has become more fierce,' the firms said in a statement.

'JVC and Kenwood concluded that a realignment of Japanese audio-visual makers will be inevitable to survive in an extremely competitive market.' JVC president Kunihiko Sato will become president of the new company, which will be called JVC Kenwood Holdings, they said.

Investors will receive two shares in the new group for each JVC share and one share for each Kenwood share.

The two partners formed a strategic alliance in July last year and agreed then to consider merging their operations under a single holding company.

Other Japanese electronics makers have also been tying up to cope with stiff competition both domestically and from rival firms in countries such as South Korea and Taiwan. -- AFP