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Kenwood Corp. and Victor Co. of Japan are considering forming a capital tieup as part of their efforts to better deal with increasingly fierce competition in the global consumer electronics industry, sources said Saturday.

If the partnership materializes, it is likely that realignment within the industry will accelerate, the sources said.

Matsushita Electric Industrial Co., which has a 52.4 percent stake in Victor, entered discussions with audio equipment maker Kenwood after Matsushita’s three months of talks with U.S. investment fund TPG over the 100 percent sale of Victor effectively broke down in late May, the sources said.

Kenwood is considering investing in Victor, better known overseas as JVC, by acquiring new shares to be issued by Victor, the sources said.

Matsushita, the maker of Panasonic-brand electronics products, is considering putting Victor, a pioneer of the VHS format for videocassette recorders, outside of its umbrella due to its prolonged poor business performance and some overlap in their product lines.

Matsushita President Fumio Otsubo and Kenwood President Haruo Kawahara reportedly met last week.

Victor and Kenwood are believed to have been seeking to eventually merge their management by setting up a holding company. In that case, Matsushita would likely sell its stake in Victor to the holding company.

As of March 31, Kenwood, which also produces car stereos and navigation systems, was about 18 percent owned by Sparx Group Co., a Japanese asset management firm which played a major role in recent tieup talks between Pentax Corp. and Hoya Corp.

There is speculation that Sparx, the largest shareholder in both Kenwood and Pentax, will offer financial assistance to Victor if the Matsushita subsidiary and the audio equipment maker form a capital and business tieup.

Kenwood’s Kawahara, who is proactive in the realignment of the Japanese consumer electronics industry, advised Matsushita last year that his company was interested in allying with Victor.

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