Japan's Panasonic, Sanyo in talks on takeover

[November 07, 2008]  TOKYO (AP) -- Panasonic and smaller Japanese rival Sanyo said Friday they are starting talks on a buyout deal that would create one of the world's largest electronics companies as soon as year-end.

Panasonic President Fumio Ohtsubo and Sanyo President Seiichiro Sano shook hands at a news conference in Osaka, monitored by satellite TV in Tokyo, underlining their willingness to negotiate Panasonic's acquisition of Sanyo.

The companies have much to gain by combining their technologies and production experise to boost global competitiveness, they said, appearing together before a traditional Japanese folding golden screen.

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

But more time is likely needed for a deal with Sanyo's biggest stakeholders, Goldman Sachs Group Inc. of the U.S. and Japanese banks Sumitomo Mitsui Banking Corp. and Daiwa Securities SMBC. Those companies invested 300 billion yen ($3 billion) in Sanyo in 2006, and hold about a combined 70 percent stake in Sanyo.

Sano said he hoped to achieve value for stakeholders but declined to elaborate on specifics.

Adding Sanyo to Panasonic would create Japan's biggest electronics maker, surpassing Hitachi Ltd., and become one of the world's largest.

Analysts say Panasonic is 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 leading maker of flat-panel TVs, digital cameras and DVD players.

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 Corp.

Panasonic's Ohtsubo said he saw tremendous potential in both the auto battery business and the solar cell business -- especially when combined with Panasonic's sprawling global marketing and sales network.

But he acknowledged Sanyo's appliance division could prove a burden because of overlap in products. He expressed hopes a careful study may prove some Sanyo appliances target different consumers and complement the Panasonic lineup. Sanyo products are generally cheaper than Panasonic offerings.

Ohtsubo said the financial crisis has brought tough times for the electronics industry, and he decided a partner was needed to achieve the next step in his company's ambitions for growth.

"We need another engine for growth," he said, adding that falling prices were hurting the audiovisual gadget sector. "We need another pillar for far greater growth. And Sanyo was that best partner."

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, analysts say.

Sanyo had been seen as a relative loser in Japan's crowded electronics sector until hopes surfaced recently about a Panasonic takeover. After shedding divisions, including its mobile phone business, it finally swung to profit in the fiscal year that ended in March for the first time in four years. Earlier this week, Sanyo reported July-September profit plunged 67 percent to 4.4 billion yen ($44 million).

Sanyo 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's profit slumped 16 percent to 55.46 billion yen ($596 million) for the July-September quarter, because of a strong yen, declining gadget prices and rising material costs.

But it has fared better than some other Japanese electronics makers amid the financial crisis because it is less dependent on exports to the U.S.

Panasonic shares fell 3.8 percent to 1,528 yen ($15.7). Sanyo edged down 0.5 percent to 203 yen ($2).

The invitation to the news conference came shortly after trading ended in Tokyo, but the issues jumped earlier in the week on Japanese media reports an announcement was imminent.

[Associated Press; By YURI KAGEYAMA]

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