Panasonic Ready for Sanyo Takeover

Panasonic, the Japanese electronics firm, is poised to launch a bid for rival Sanyo in a deal that would see the formation of the country's biggest electronics maker. Panasonic will announce its plans later this week, according to media reports, and begin negotiations with Sanyo's three major shareholders, Goldman Sachs, Daiwa Securities SMBC and Sumitomo Mitsui Financial Group. They aim to complete the deal by April next year.

Together, the two electronics firms would have revenues of ¥11.29tn based on forecasts for the current financial year, higher than the ¥10.9tn forecast by Hitachi, Japan's biggest electronics maker in terms of sales. Under the agreement, Panasonic would buy nearly 430 million preferred shares in Sanyo, each of which can be exchanged for ten common shares, giving it a 70% stake in the company worth about ¥620bn.

Reports said today that the presidents of Panasonic, the world's biggest maker of plasma TVs, and Sanyo, the global leader in rechargeable batteries, had agreed in principle that Sanyo would become a subsidiary.The tie-up would strengthen Panasonic's position in the expanding global market for lithium-ion batteries and put it in direct competition with Sony for contracts with makers of electric and hybrid cars. It would also have access to Sanyo's expertise in solar power cells, while its smaller rival would be able to take advantage of Panasonic's huge customer base.

Sanyo was forced to issue ¥300bn in preferred shares in 2006 to Goldman and the two Japanese banks after a fall in earnings, blamed in part on earthquake damage to its microchip plant.

Panasonic's ambitious plans for global expansion have been boosted by the financial crisis and recent plunges in Japanese stocks. Its interest in Sanyo is rumored to have intensified as it watched shares in the struggling firm sink by almost a third over the past two months. It may eventually attempt to acquire all of Sanyo's shares and make it a wholly owned subsidiary, reports said.

The for-cash sale would also help Goldman Sachs as it attempts to reassure creditors and stabilize its balance sheets. Sumitomo Mitsui, too, is in the hunt for revenue after lowering its profit forecast for this fiscal year by 63% last week.

Sanyo registered net profit in March for the first time in four years after its new president Seiichiro Sano – the first to have been appointed from outside the founding family in the firm's 60-year history – targeted growth areas such as rechargeable batteries and solar panels. But it has struggled in the face of competition from more than ten other electronics firms, including Sony and industrial conglomerates such as Hitachi and Toshiba.

Panasonic sources were quoted as saying that the jobs of Sanyo's 100,000 employees would be safe.