Panasonic, Sanyo to ink merger

Source: Agencies  |   2008-11-8  |     NEWSPAPER EDITION

PANASONIC and smaller Japanese electronics rival Sanyo are starting talks on a capital and business alliance and aim for a buyout deal by year-end, both sides said yesterday. The deal is expected to cover the solar cell, battery and other businesses.

The presidents of the two companies - Panasonic President Fumio Ohtsubo and Sanyo President Seiichiro Sano - held a joint news conference in Osaka. The decision to pursue talks to make Sanyo a Panasonic subsidiary came at board meetings yesterday.

"Panasonic and Sanyo will start discussions with the aim of maximizing both companies' corporate values by pursuing synergies between both companies," they said in a statement.

Speculation has been rife that cash-rich Panasonic Corp is interested in buying Sanyo Electric Co, which has been struggling to turn itself around.

But more time will be needed for a deal as Sanyo's biggest stakeholders - Goldman Sachs Group Inc of the United States and Japanese banks Sumitomo Mitsui Banking Corp and Daiwa Securities SMBC - have to arrive at a decision.

These companies invested 300 billion yen (US$3 billion) in Sanyo in 2006, and hold about a combined 70-percent stake in Sanyo.

A Sanyo-Panasonic merger would make it Japan's biggest electronics maker, surpassing Hitachi Ltd.

Analysts say Panasonic is also eyeing Sanyo's green energy businesses - solar panels and batteries - both areas that could prove lucrative in coming years.

Panasonic, which changed its name from Matsushita Electric Industrial Co last month, is a leader in flat-panel TVs, digital cameras and DVD players. But it does not have solar cell operations.

By gaining Sanyo's powerful lithium-ion battery business for autos, Panasonic can hope for a significant global share when combined with its own battery operations. Panasonic makes auto batteries with Toyota Motor.

But Sanyo's appliance division could prove a burden because of overlap in appliances and digital gadgets.

The companies said they hope to reduce production and development costs through working together on technology and joint procurement.

Panasonic and Sanyo, both headquartered in Osaka, have historical ties. Sanyo's founder was a brother-in-law of Panasonic's founder, Konosuke Matsushita.

Although such ties may not directly affect the outcome of a deal, they could help make for a smoother acquisition, analysts say.

Sanyo had been seen as a relative loser in Japan's crowded electronics sector until hopes surfaced recently about a Panasonic takeover.

In recent years, Sanyo has shed unprofitable operations and slashed jobs to focus on its core businesses.