The company said in a statement that it had also invited the European Bank for Reconstruction and Development to take an equity stake in Velt and that the bank intended to hold a majority of shares.
The Philips statement, released from the company's headquarters in Eindhoven, Netherlands, said equity investment and expansion costs will initially come to around $50 million.
A Philips representative in Moscow declined to comment on the deal saying that further information will be available in two weeks.
Meltem Ankara, an EBRD representative in London, said the project is under review by the bank, but has not yet been approved.
"We are looking at the deal right now, and we hope to announce our decision by the end of August," Ankara said.
In its statement, Philips said the venture fitted in with its plans to enter the Russian market with high-quality picture tubes as part of its overall strategy to expand global production to meet the demands of a growing world market.
Velt has an annual production capacity of 1.8 million picture tubes and employs 7,500 people. Philips plans to increase this capacity to more than 3 million by the end of 1999. Velt will immediately begin production of 1.5 million sets of glass parts for the company's assembly plants in Spain and Austria.
Philips already has a number of ventures in Eastern Europe including a lighting and battery plant in Poland.
The Dutch giant specializes in the manufacture of lighting, consumer electronics, communications, music, film and medical and industrial systems. In 1994 global turnover amounted to 61 billion Dutch Guilders ($39 billion) with a pre-tax profit of 2.9 billion Guilders. (Reuters, MT)
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