Panasonic, Sanyo rumors heat up again

Nov. 4, 2008 – Panasonic Corp. (née Matsushita Electric) reportedly is fulfilling prior market wishes with a formal pursuit of domestic firm Sanyo Electric, a pairing first hinted at earlier this year, according to local media reports.

The Jiji wire service and Nikkei daily paper both say Panasonic is in the midst of talks with Sanyo’s top three shareholders (Sumitomo Mitsui Banking, Daiwa Securities SMBC, and Goldman Sachs, with Daiwa playing early matchmaker) over their combined ~430M preferred shares that could be converted into common stock. A deal is said to be possible by week’s end, which would raise Panasonic’s existing stake in Sanyo to 70%, worth about ¥620B (US ~$6.27B) based on Sanyo’s current stock price.

Citing unidentified sources, Jiji claims Panasonic president Fumio Otsubo and Sanyo president Seiichiro Sano met in late October and reached a broad agreement, where Sanyo “demanded” and was promised retention of its name/brand, management independence, and jobs. The Nikkei added that Sanyo, which would be converted into a Panasonic subsidiary, would nonetheless have to “beef up restructuring efforts” to improve profitability.

In terse press releases, both Panasonic and Sanyo claim nothing has been decided on either side (but neither denied the reports).

Rumors swirled back in April about a possible combination, and then as now investors seem to be voicing their approval for such a combination. Investors tacked on a third in value to Sanyo shares hours after the news broke over the weekend.

The two Japanese electronics giants have some overlapping businesses including semiconductors, but Sanyo holds the top position in lithium-ion batteries (major market: automotive, with Volkswagen AG) and has an attractive growth position in solar panels. Fifth-ranked Li-ion battery maker Panasonic, meanwhile, is building what the Jiji says is the world’s largest lithium-ion battery plant in Osaka. For Sanyo, it would gain stronger financial backing from Panasonic to boost is investments, and also tap the firm’s customer base, noted the Nikkei.

Combined their current fiscal-year (to March 2009) sales would total about ¥11.22T/$113.4B (¥9.2T/$92.9B for Panasonic, ¥2.02T/$20.4B for Sanyo), becoming Japan’s top electronics maker ahead of Hitachi (¥10.9T/$110.16B). Sanyo, which has struggled of late and seen its top executive ranks upended in a turnaround effort that seems to be working, as the firm swung to its first net profit in four years in fiscal 2007 (ended March 2008) thanks to reorganization efforts and focus on technology such as batteries and solar panels.

The proposed combination also would be a breath of fresh air for Japan’s “fragmented electronics industry,” where “no fewer than a dozen electronics firms are locked in fierce competition,” points out the Nikkei.


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