Kenwood, which makes car navigation system and audio visual products, and Sparx, an investment fund company, will spend ¥30 billion to subscribe to new shares to be issued by the struggling consumer electronics maker JVC, the newspaper reported.

The deal would help struggling Japanese consumer electronics maker JVC to boost its financial strength and keep up with the fierce price competition, sources close to the matter said.

Under the deal, Matsushita Electric Industrial Co. Ltd , which holds a 52-per cent stake in the company would lower it to 39 per cent and take the loss-making company off its consolidated accounts.

After the transaction, Kenwood would hold a 10 per cent stake in JVC while Sparx would own a 5 per cent stake.

Panasonic maker Matsushita would raise 30 billion yen ($250 million) by issuing 20 billion yen worth of new shares to Kenwood and 10 billion yen worth of new shares to Sparx Asset Management.

JVC and Kenwood had reached a preliminary agreement to merge under a holding company as early as June 2008, but the two firms are set to continue talks on the matter since there is still resistance within JVC against the plan, the sources said.

Matsushita, the world''s largest consumer electronics maker, has been trying to reduce its JVC stake, worth about 48.5 billion yen, because its persistent losses have been weighing on its group-based earnings performance.

In march, this year, the Osaka-based company chose US private equity firm Texas Pacific Group as its preferred bidder for its JVC stake. But the talks fell through after banks refused to finance the acquisition as they were unconvinced that TPG could turn around a company heading for its fourth straight annual loss.

JVC enjoys brisk demand for its hard disk drive-equipped camcorders falling plasma TV prices have hit sales of its rear-projection television sets. JVC 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.

Yokohama-based JVC expects a net loss of 10.5 billion yen for the current business year to March 2008, after posting a 7.9 billion yen loss a year earlier.