Panasonic, Sanyo shares soar amid takeover reports

[November 04, 2008]  TOKYO (AP) -- Reports that Panasonic Corp. is close to buying smaller rival Sanyo Electric Co. sent shares of both companies soaring in Tokyo Tuesday, fanning speculation that Japan's crowded, intensely competitive electronics sector could face consolidation.

The deal, if realized, would provide much-needed cash for Goldman Sachs Group Inc. of the U.S., which along with Japanese banks Sumitomo Mitsui Banking Corp. and Daiwa Securities SMBC invested 300 billion yen ($3 billion) in Sanyo in 2006.

Adding Sanyo to Panasonic would create Japan's biggest electronics maker, surpassing Hitachi Ltd., and be among the largest in the world.

Sanyo's solar panel business would likely prove an asset for electronics giant Panasonic amid growing interest for green energy. Panasonic, which changed its name from Matsushita Electric Industrial Co. last month, is a leading maker of flat-panel TVs, digital cameras and DVD players.

Sanyo's powerful lithium-ion battery business for autos is another gem for Panasonic, which can hope for a significant global share when combined with its own battery operations, said Tatsuya Mizuno, director at Fitch Ratings in Tokyo.

Sanyo's appliance division, however, could prove a burden for Panasonic because of inefficiency and overlap, he said.

"There's both a plus and minus, but people today were looking only at the plus side," he said.

Sanyo's shares had tumbled by a third the last two months, giving Panasonic an opportunity to exploit the recent plunge in the Tokyo stock market to buy a smaller company.

On Tuesday, demand for Sanyo shares was so great that it was bid-only 195 yen ($1.96) and finished at that price. It had closed Friday at 145 yen ($1.46). Panasonic also shot up, rising 6.8 percent to 1,614 yen ($16).

The Nikkei, Japan's largest business newspaper, and Kyodo News agency reported Saturday the companies were in talks for a deal. Markets were closed Monday for a national holiday, so Tuesday was the first day investors could buy and sell shares.

Panasonic and Sanyo officials denied Tuesday that any deal has been reached.

But a deal would also benefit financial companies with stakes in Sanyo and which have come under pressure in the global financial crisis.

Goldman Sachs and the two Japanese financials hold about a combined 70 percent stake in Sanyo if their preferred shares are converted into common stock, according to Sanyo.

In September, Warren Buffet's Berkshire Hathaway Inc. said it was investing at least $5 billion in Goldman Sachs Group Inc. in a deal aimed at shoring up the bank's balance sheets and calming creditors. Last week Sumitomo Mitsui Financial Group cut its profit forecast for the fiscal year ending March 2009, by 63 percent.

Koya Tabata, analyst with Credit Suisse in Tokyo, said he was monitoring whether Panasonic completes a study toward a buyout. Among risk factors is a possible supply glut of Sanyo batteries and other products from the recent economic slowdown, while Sanyo's battery and solar cell businesses could help make Panasonic more competitive, according to his report.

Panasonic and Sanyo, both based in Osaka, central Japan, 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 because of shared corporate cultures.

In recent years, Sanyo has been struggling to turn itself around and has shed unprofitable operations and slashed jobs to focus on its core businesses, which include batteries and well as solar energy. It swung to profit in the fiscal year that ended in March for the first time in four years.

Sanyo -- which is scheduled to report earnings Wednesday -- was hurt by a 2007 accounting scandal about falsifying past earnings and reporting a profit when it was in the red. The scandal forced a reshuffle at its top management. Sanyo also suffered from a 2004 earthquake near its chip-making plant.

Panasonic has fared relatively better against the strong yen than other Japanese rivals like Sony because Panasonic depends less on foreign sales.

Although specific possible deals have not surfaced, experts have long said that the nation's electronics sector has too many companies making similar products, which are likely to struggle in the harsh environment of a global slump.

For years, Pioneer Corp. built its business around a niche technology -- plasma display panels -- but has sunk into losses in recent years, and has begun buying the the panels from Panasonic. Pioneer last year formed a tie-up with rival Sharp Corp. in liquid crystal displays, another flat-panel TV technology.

Panasonic has recently spun off Victor Co. of Japan, which was a Panasonic affiliate since 1954. Analysts note Panasonic took longer than expected to finalize its stake reduction in Victor, which merged last month with Kenwood Corp., a Japanese electronics and technology company.

The acquisition speculation was a rare bright spot for Japan's stock market, which has plunged about 40 percent this year on worries that a global recession will weaken demand for exports and erode corporate profits. On Tuesday, the Nikkei climbed 6.3 percent, partly on hopes for a Panasonic-Sanyo deal.

[Associated Press; By YURI KAGEYAMA]

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