Panasonic to acquire Sanyo Electric

Panasonic aims to make Sanyo a subsidiary that will create Japan's largest electronics maker.

Panasonic said it aims to make Sanyo Electric a subsidiary in a move that will create Japan8217;s largest electronics maker.

The announcement was widely expected after sources said that Sanyo and Panasonic, sitting on 10 billion in cash and cash equivalent, had agreed in principle to such a deal, which one brokerage analyst has estimated could be worth up to 8.8 billion.

The two Osaka-based companies will hold a joint news conference at 7 p.m. on Friday attended by Panasonic President Fumio Ohtsubo and Sanyo President Seiichiro Sano.

The move, a rare outright acquisition in the overcrowded Japanese electronics sector, comes as makers of flat TVs and digital cameras worldwide scramble to boost profitability amid the global economic slowdown.

Panasonic did not say how much it plans to offer for each Sanyo share but Credit Suisse analyst Koya Tabata earlier this week reckoned Panasonic could offer up to 140 yen per Sanyo share, a premium of 40 per cent to Sanyo8217;s enterprise value that would value a deal for the whole of Sanyo at up to 862 billion yen 8.8 billion.

Panasonic, the world8217;s top plasma TV maker and formerly known as Matsushita Electric, is keen to acquire Sanyo because of its leading position in rechargeable batteries, which are widely used in mobile phones and laptop PCs.

The new entity would in particular be well-positioned to benefit from a shift in the auto industry to hybrid and electric vehicles.

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Panasonic runs a car battery venture with Toyota Motor Corp, while Sanyo offers nickel metal hydride batteries to Ford Motor Co and Honda Motor Co Ltd and develops lithium-ion batteries for cars with Volkswagen AG.

8220;As a result of this merger Panasonic will become a huge firm, the Toyota of the electrical appliance world, and that8217;s good,8221; said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities.

Referring to US President-elect Barack Obama he added: 8220;Under an Obama administration there8217;s likely to be quite a push towards clean energy, and that means that Panasonic is now in a very strong position given Sanyo8217;s battery production. They have this market wrapped up now.8221;

The deal would also enable it to enter the promising solar market as Sanyo is the world8217;s seventh-largest solar cell maker behind such rivals as Germany8217;s Q-Cells, Japan8217;s Sharp Corp and Suntech Power Holdings Co Ltd of China.

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Reuters and other media reported on Saturday that Panasonic was in talks with Sanyo8217;s top three shareholders Daiwa Securities SMBC, Sumitomo Mitsui Banking Co and Goldman Sachs to take control of Sanyo.

Daiwa Securities SMBC is a joint venture between Daiwa Securities Group and Sumitomo Mitsui Financial Group SMFG, while Sumitomo Mitsui Banking Corp is Sanyo8217;s main bank and an SMFG unit.

Mizuho Asset Management fund manager Yoshihisa Okamoto sees the deal as positive for Panasonic, but said sluggish auto demand and falling oil prices could dim the prospects for solar panels.